If 2011 was the year in which there didn’t seem to be much news to talk about, 2012 is its virtual opposite, a bull market in news — culminating in Hurricane Sandy and this Tuesday’s presidential election.
How will these events play out for investors and for those looking for some upbeat news in this still-trying economy? A few predictions:
* Forget the conventional wisdom that there is a big economic silver lining waiting in the aftermath of Sandy — that storm recovery will be “good for the economy.”
Yes, that has sometimes been the case after storms that have hit far less- populated portions of the Southeast coast and triggered a run on new windows and building supplies.
But Sandy was no ordinary storm. The sheer breadth of its path means it affected some 60 million Americans. As economist David Rosenberg wrote on Friday: “There has not been such devastation affecting so many participants in the US economy before.” As a result, Rosenberg expects that US gross domestic product will contract in the current quarter.
* In a sign of the retrenchment in the financial-services sector, last week Swiss banking giant UBS announced that it would cut 10,000 positions worldwide by 2015.
Reuters reported that some of the firm’s bond traders in this area were fired by cellphone just before Sandy hit on Monday.
Looming layoffs, and salary and bonus cuts, are the dirty little secret on Wall Street these days. As Morgan Stanley CEO James Gorman said last month, workers are “still overpaid.”
* The twin impact of Sandy and layoffs on Wall Street could have a dampening effect on holiday sales — especially at the luxury level. The timing of the storm and the impending cuts in jobs and bonuses set up the scenario.
“Normally these major weather shocks happen in August or September,” cautions Rosenberg. “We are already in November and on the precipice of the most important time of the year for the retailing sector.”
Indeed, seasonal hiring is up this year, by the likes of Kohl’s and Macy’s in anticipation of robust consumer spending — spending that may not materialize.