Goldman Sachs recently issued 10 answers to 10 important question. The answers follow courtesy of the WSJ:
1. Have house prices bottomed?
Probably not yet, but we are quite uncertain.
2. Will banks become more willing to lend?
Probably yes.
3. Will small-business activity pick up?
It should, but so far we are not seeing it.
4. Will hiring revive?
Yes, but we expect the rate of job creation to reach only about 100,000 per month by the second quarter, not enough to push the unemployment rate down in a meaningful way.
5. Does the savings rate have further to rise?
Yes, we think so.
6. Will inflation fall further?
Very likely yes.
7. Does the dollar pose an inflation risk?
Only to a very limited degree.
8. Will Congress pass more fiscal stimulus?
Yes.
9. How will the Fed “sequence the exit”?
In 2010, the main form of “exit” is likely to be an end to asset purchases. … We expect neither a hike in the funds rate nor outright sales of assets on the Fed’s balance sheet in 2010 (or for that matter in 2011).
10. Will the end to the [Fed’s] asset purchases tighten financial conditions?
Possibly, although the degree is highly uncertain.
You can find Goldman’s 2010 outlook here.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.