Making Money Alert: A Bullish Consensus on 2013?

The year is nearly in the books, and now is the time when all of the professional pundits, amateur speculators, and major brokerage houses give out their forecasts for the year ahead.

According to a recent Barron’s cover story, “Outlook 2013,” there is a bullish consensus among the financial elite that the equity market will see about a 10% gain in 2013. The 10 strategists surveyed for the article see gains ahead for the S&P 500 Index, and their mean S&P prediction for 2013 is 1562. That implies about a 10% price gain from the levels on the Dec. 17 publication date.

Hey, I will be the first one to be pleased if this prediction turns out to be correct. But the way I see it, the market still has way too many unknowns here to be prognosticating a double-digit percentage gain.

Among the highlights in the consensus opinion is a likely deal on the “fiscal cliff” that will remove the major source of uncertainty that’s plagued the markets since the election. Then there’s a continuation of the Fed’s easy money policies, which I think is a “no brainer” prediction. The pundits also predicted increased corporate spending and hiring in 2013, which could lead to better economic growth.

Unfortunately, the rosy consensus here is devoid of any outlier, “black swan” events that could rock the markets.

One company highlighting potential outlier events is Saxo Bank. Some of the bank’s predictions for 2013 are definitely outside of the normal realm, but they definitely are plausible.

Events such as a doubling in Treasury bond yields is one of the more likely events, as I see it, but the bank also has potential events such as a plunge in crude oil prices to $50 per barrel, and a correction in gold prices to below $1,200 per ounce.

Those two latter events are unlikely, but what the Saxo predictions show is that when it comes to markets, it’s not just about the mainstream consensus. In fact, the more consensus opinion there is out there, the more I worry about what actually will take place.

Whatever happens, 2013 is likely to be another eventful year, and we’ll be here to watch it all unfold, and to make sense of it, every week in the Alert.

Happy New Year!

Wisdom from “The Big Man”

“I wanted an electric train for Christmas but I got the saxophone instead.”

–Clarence Clemons

The fantastic sax player and long-time member of Bruce Springsteen’s E Street Band is, sadly, no longer with us, but his music will live on for decades to come. In this Christmas-related quote, “the Big Man” as Bruce called him, shows us that one gift, or one seeming disappointment, can sometimes translate into a tool of genius that has given millions pleasure. So, whatever you got for Christmas this season, make use of it to its full capacity. Who knows, you might end up transforming that gift into beauty for us all, just the way Clarence did.

To read my e-letter from last week, please click here. I also invite you to comment about my columns in the section provided below.

Wisdom about money, investing and life can be found anywhere. If you have a good quote you’d like me to share with your fellow Alert readers, send it to me, along with any comments, questions and suggestions you have about my audio podcast, newsletters, seminars or anything else. Click here to ask Doug

To the best within us,

Doug Fabian