1) US GDP growth will remain modestly positive as the economy benefits from an extension of the payroll tax cuts and various other election year fiscal stimulus measures designed to spur employment and economic growth.
2) At least one rating agency will downgrade US debt. Election year campaign promises will reduce the odds that anything will get done to address the growth in entitlement spending. The rating agencies will respond in kind, but the reaction will be muted as the US remains the only safe haven. Treasury yields will remain very low.
4) Unless there is a disruption in the Middle East, the
5) The European Union will be held together by a thread as officials continue putting fingers in the dike. There will be an agreement on closer fiscal oversight by a centralized European authority. However, the bazooka of Eurobonds and/or massive ECB buying of sovereign debt will remain elusive. Private holders of Greek bonds will agree to a haircut of greater than 50%. A European Bank will fail.