by Zubin Driver
January 07, 2010
After a year that surely exceeded all expectations, investors are right to wonder how strong performance will be in the year to come. In 2010, stimulus will still be pumping through most western economies, though at a lesser pace than it was in 2009. This lifeline alone should be enough to fortify global economies and markets as we start the new decade. Barring any new calamities that provoke broad based panic, a stable environment should form the basis for a performance-driven market in which strong achievers will be rewarded.
In 2009, most of the themes that propelled markets from 2003-07 saw a resurgence, with the notable exception of US housing. Expect the same themes to dominate in 2010--namely, a reliance on emerging economies to drive global growth, which will benefit the commodities and technology sectors. Uneasy question marks that threaten to derail the recovery will remain. Such question marks include unemployment, as well as central bankers' difficult balancing act between inflation and deflation, and when the right time will be to remove stimulus and other quantitative easing programs. Longer term, Western government debt, along with the possibility that governments have become stuck on a path of structural deficits, will be compounded by demographic difficulties rooted in aging populations and growing bills from spending that will not be easy to curtail.
In this mixed environment investors should be both poised and prudent. Poised to take advantage of opportunities in the commodity and technology spaces, but also prudent by diversifying positions taken, keeping some cash at the sidelines, and taking profits when they present themselves.
A steep Rise / Laggard Areas ready to catch up
The sheer steepness of the rise from the lows of March is enough to make one cautious. With equity markets up over 50%, oil and copper more than 100%, it is difficult not to question how much higher things can go in the short term. How vulnerable may we be to a significant correction, especially given the backdrop of concerns mentioned above? Watching oil move up through $80 in the first week of January, it's easy to think of the last time oil broke over $80 in late '07, and about half a year later shot to $140, a massively inflated price which contributed to the meltdown that happened later in 2008. Keeping such considerations in mind, one hopes that we don't see such parabolic excesses in the year upcoming.
It will also be interesting to see how sectors that did not rebound so aggressively last year perform in 2010, such as uranium and natural gas. Has gas finally made a bottom, despite naysayers' assertion that the unlocking of shale gas will mean oversupply and depressed prices for years? Or will uranium finally start moving above $50 / lb in the short term spot market, hopefully bringing more excitement to that sector?
With so many crosswinds at play, the year ahead will not be dull. So long as stability reigns and panic is kept at bay, 2010 should be a rewarding year for selective investors.
Best regards,
Best regards,
Zubin
Zubin Driver
Investment Advisor
(W) 604 643-7608 / (F) 604 643-7606
Email: zubin_driver@canaccord.com
Canaccord Capital Corporation
Attention: Zubin Driver
P.O. Box 10337 Pacific Centre
2200 - 609 Granville St.
Vancouver, B.C. V7Y 1H2
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 OFFICES IN MAJOR CENTRES ACROSS CANADA. MEMBER OF ALL CANADIAN STOCK EXCHANGES AND THE INVESTMENT INDUSTRY REGULATORY ORGANIZATION OF CANADA. MEMBER CANADIAN INVESTOR PROTECTION FUND (CIPF).
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