Investor Agenda

3 Important Shifts in 2009

By almost any standard, 2009 has to be considered an historic year – what is sure to be remembered as a year of significant change for investors.

Wall Street bull

A new president signed into law a massive $787 billion economic stimulus bill, unemployment numbers set record highs, interest rates hit record lows, and all the while the market staged what is perhaps the most surprising event of the year: a sizable rally.

Here are what I consider three of the most important "shifts" in the investing landscape that took place in 2009:

1. The stock market and economy begin to recover.

The beginning of 2009 continued the gut-wrenching decline that began in late 2007 and carried through a tumultuous 2008. Through the bottom on March 9, the S&P 500 had plummeted 25% in only about nine weeks.

And then, just when it seemed there was no end in sight, stocks turned around. The market is up more than 60% since the bottom and has gained more than 20% for the year.

I have been surprised by the vibrancy and confidence in the stock market, especially considering that we didn't have evidence of an economic recovery when the rally started. I think part of the bounce can be attributed to what was probably an over-reaction on the down side in 2008, but it's also another reminder that the market looks forward and not backwards.

Of course, there have been signs of an economic recovery as well–those "green shoots" we heard about earlier in the year. The most important was a return to growth in the third quarter. The investors and business leaders I talk with also see signs of improvement, but there is still a strong sense of caution here in the early stages of what has been a tepid recovery.

2. Investors seek profits globally as emerging markets regain their strength.

I can't help but think back to a recent issue of our Wall Street newsletterwhen we focused on global investing. One of our investing pros, Clark Winter, told us that "the bear market has changed globalization from an option to a necessity."

Just take a look at your iPhone. On the back in very small letters it says, "Designed by Apple in California. Assembled in China." That about says it all.

We're all connected now, and the world is a small place. Investors have real alternatives when it comes to finding growth and exciting opportunities. I've heard a lot of talk about South America in the past year, most notably the growth in Brazil. Asia also flexed its growth muscles again in 2009, especially in China, which returned to a 9% growth rate.

3. Adjusting to the "new normal" after the financial crisis.

Given that the whole financial system nearly collapsed in 2008, it's no surprise that 2009 was about dealing with the residual effects. The landscape for the entire financial industry has changed. There are fewer players, which means a more concentrated group of kingpins for investors to choose from.

In addition, banks are taking on less risk than they used to when it comes to their debt. This is the bread and butter for some institutions, so risk will never go away, but it should remain less than it was leading up to the crisis at least for a little while.

Another effect is the role of government in business and investing. Over the past year and back into 2008, we've seen the government get involved with bailouts, loans and even taking over companies. It wasn't just in the U.S., either.

Then you have all of the fiscal stimulus strategies in place around the world. Many people I talk to believe these efforts as a whole have helped stabilize the economy and the markets, and looking back over the past year, it would be hard to argue with that. The challenge, of course, is when and how the governments unwind their involvement and stimulus programs. That will be a crucial question in the coming year and one we will watch closely here at Investor Briefand CNBC.

Taking Stock as We Turn to 2010

Here in the U.S., the jobs picture remains bleak, consumers are still cautious with their money, and portfolios are climbing back to where they once were. All in all, however, it wasn't nearly as bad a year as it could have been. In fact, for many it's been a good year.

I hope that's been the case for you, and I hope 2010 is even better for everybody.



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