Predictions: 9 For '09 In The Markets

Last year at this time, we happily said goodbye to 2007 with a naive hopefulness that 2008 would be better. The credit crisis would end, the economy would show its resilience, and stocks, well stocks, were supposed to go up. Instead, the credit crunch worsened, the government rescued (or didn't rescue) a series of financial institutions and stocks hit an 11-year low.

So much for year-end prognostications. It only makes sense to turn up the gloom factor on 2009 predictions, and hope for the best.

1. Manic Markets

Volatility in the stock market continues to be the norm as the New Year starts. But stocks could slip into a protracted, quiet period before ultimately moving slightly higher later in the year. Credit markets begin to heal but not before more market calamity and dislocations.

2. 'R' Word

Last year, nobody wanted to say it but it's now clear, the economy could be in full-blown recession for most of the year. Third quarter will hopefully be a turning point.

3. Jobs

Unemployment numbers get pretty bad. Look for a high of close to 10 percent by the end of the year, or greater depending on how the next fiscal stimulus package is dispersed.

4. Financial Institutions

More fail, more merge, and the government has a new group it helps in the first quarter. But by year end, look for some institutions try to shake loose their new government shareholder. Other will have the government riding along for a long time to come.

5. Housing

It's the starting point and end of the financial meltdown and unfortunately, it doesn't get better any time soon. By year end, it may start to seem like there's a faint light at the end of the tunnel, not a train. The first part of the year could be just ugly.

6. Washington

The government continues to find creative ways to jump into the inner workings of the financial markets and to save companies from themselves. By the spring, everyone agrees it's now a bad idea and there's been enough interference. In the first quarter, the government's role as shareholder starts to take shape, and we see just how much meddling regulators will do with the companies they oversee.

7. Foreign Affairs

Economic recovery and the functioning of the international banking system are dependant on the cooperation of world leaders and central banks. So far, there's been an unprecedented, far reaching level of cooperation. The challenge in 2009 will be how these forced allegiances perform under pressure. But because each country knows its survival depends on the whole planet thriving, they continue to work on a global solution.

8. Currency

The dollar holds its gains against the euro and other currencies. Risk aversion fades, pushing the yen higher.

9. Uncharted Territory

We hear that about a million and a half times when those who give out advice and make forecasts tell us they could not have predicted what the markets and economy would do next.

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