It wouldn’t be the holiday season without a few predictions for the year ahead. Still, making such a list is always risky. 2012 turned out to be a newsy year full of events that could have rattled investors, but didn’t.
Stocks sailed through the flop of the Facebook initial public offering, billions in losses by the London Whale and the devastation of Sandy to finish the year with fairly respectable returns and the lowest volatility in years.
As the ball gets ready to drop on 2013, few players have changed from a year ago. Warren Buffett is still at his perch in Omaha, and Ben Bernanke is secure as the Fed preps to celebrate its centenary.
Still, with Europe in recession, Japan in disarray and President Obama readying for a second term, 2013 is likely to pack more surprises than have the past few years. So here’s my list of predictions, guided by the investment advice of some of the best in the business:
* The strategy of buying the Dogs of the Dow for investment gains the following year will continue to be a winning proposition. Last year’s biggest dog, Bank of America (down 58 percent in 2011), rose right to the top of the leader board by more than doubling in 2012. This year’s dogs include McDonald’s, Intel, Caterpillar and Hewlett-Packard, though in the case of HP, sometimes a dog really is a dog.
* Homebuyers who didn’t lock in record low mortgage rates last July when the 10-year Treasury yield dipped to 1.39 percent will likely never see rates like that again in their lifetimes, but Jeffrey Gundlach of the DoubleLine funds doesn’t expect US rates to move much higher in 2013, so it will still be a good year to buy.
* Obama will appoint his chief of staff, Jacob Lew, to fill Tim Geithner’s shoes at Treasury, but the move will run into resistance in the Senate. Lew worked at Citigroup between 2006 and 2009 as the chief operating officer of the bank’s Alternative Investments group, making him a “Wall Street person” in the words of Rolling Stone’s Matt Taibbi — not a résumé-builder these days. If Lew doesn’t pan out, look for the White House to tap American Express chief Ken Chenault. Who better than the head of a credit card company to run Uncle Sam’s Treasury?