Predictions 2012

Bob Pisani: Stocks

1. Global QE in early 2012 — in Europe, the U.S., Japan, and China — will step up.

The European Central Bank has not printed money (QE) — yet. The ECB has expanded its balance sheet, but banks are not taking the money and lending to anyone: they're just keeping funds with the ECB. The ECB will be forced to print money in an effort to get the eurozone going again.

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2. The U.S. stock market will continue to outperform Europe and the rest of the world.

US economic data in the fourth quarter is already outpacing Europe and will continue to do so at least into the first half of 2012.

3. The China slowdown is real. There will be a banking crisis and commodity prices will drop midyear.

Chinese officials will drop concerns about inflation and aggressively lower bank reserve requirements to stimulate economic growth, a process begun on Nov. 30th.

4. No transaction tax in Europe, or here, will be imposed.

On the surface, a tax on financial transactions seems to make sense: it's one of the last transactions of any kind that are untaxed on a direct basis in Europe, so it's a tempting target. But all participants know that without full participation in Europe and the US transactions will simply move across borders; that was the experience of Sweden when it instituted a similar tax in 1984, which was subsequently repealed. The active opposition of the U.S., the U.K. and Sweden make it unlikely that Germany and France would risk the health of their own trading operations.

2011 Scorecard

A tough year for prognostication. I'd give myself a B-.

1. The U.S. stock market outperforms most other markets, as the U.S. economy improves.

Right on! The Dow Industrials by Thanksgiving, down 0.7 percent for the year, S&P 500 down 5.5 percent, but Japan is down 18 percent, Shanghai 15 percent, France 25 percent and Germany 20 percent.

2. The laggards of 2010 outperform the overall market in 2011.

Partially right. Drug stocks — which were down fractionally in 2010 when theS&P 500was up over 12 percent — have outperformed this year, as have utilities, another 2010 laggard.

But housing never did recover; nor did brokers. Defense stocks also continued to lag.

3. Mexican stocks hit a record high.

Right on, again. The  Mexican Bolsa hit a record high in 2011. OK, it was in January, but it's not that far off the high right now.

4. Gold declines but other commodities gain.

Wrong. Gold is off its highs but well above its January level of about $1,375 an ounce. Other commodities are mostly down.

5. The U.S. bond market drops.

Wrong, as well. My only consolation is that this was a universally anticipated trend; everyone was on the short side on this.

6. Municipal bonds come under pressure as a half-dozen local governments default on their general obligation bonds.

Make that three. There were a few high-profile defaults (Harrisburg. Pa., for one) but for the most part the municipal bond market never sold off significantly.