1. Bonds keep booming.
The secular bull market in bonds should continue through 2011. Bond investors may fear inflation, but as we often point out on “The Strategy Session,” secular changes will keep driving rates on all fixed-income securities to record lows—Treasuries, munis, and corporate bonds alike.
2. Goldman Sachs roars back.
For Goldman Sachs , 2010 has been a year full of harsh public scrutiny and communications crises, meaning the firm has been forced to play defense. In 2011, it’ll be back on offense, re-emerging as the dominant global investment bank. I expect Goldman to lead the Wall Street league tables next year in both equities and debt.
3. M&A activity explodes.
With such high levels of liquidity in the capital markets, you can expect to see an explosion in the number of management- and activist-led buyouts. In fact, I’m going to go out on a limb and predict record M&A activity here. It’ll be the 1980s all over again.
4. IPO Market slows.
By December 2011, the picture will still be pretty grim, with the unemployment rate stuck around 10 percent. Why? As long as firms can generate decent returns from invested capital, they have no incentive to invest in human capital. Expect the government to be the only place hiring.