Don’t Get Caught Unprepared!
Now that the elections are behind us, the forces that will shape your portfolio in 2011 are starting to become clear. Fed policy, M&A activity, consumer confidence and the price of commodities are just a few of the factors you need to consider as we close out the year.
Hilary Kramer is predicting nine GameChangers that will affect the stock market, the economy — and most importantly — your money in 2011.
Here’s what you can do now to profit from the 9 GameChangers of 2011.
#1 – Politics: Gridlock Is Music to Wall Street’s Ears
The Republican rout means gridlock will rule the day in Washington. That eliminates uncertainty for both Wall Street and businesses since it will be nearly impossible for President Obama to pass any more sweeping legislation. Plus, having pro-business Republicans back in charge of the House means a likely compromise on tax cuts, a push back on health care reform and the end of new financial regulation — all music to Wall Street’s ears.
I expect we’ll have a stock market rally that will close out 2010 and carry us well into 2011.
#2 – Tax Cuts Extended
The Republican takeover of the House combined with their gains in the Senate virtually assures that the Bush tax cuts will get extended. Just two days after the election, President Obama signaled his willingness to work with Republican leaders on a compromise that would keep the popular tax cuts going — reassuring news to companies and consumers alike.
Here’s just one example: Networking giant Cisco Systems, Inc. (NASDAQ: CSCO) has stated that they’ll likely start paying a dividend next year — if they have a “favorable tax basis.”
#3 – Companies Stop Hoarding (so much) Cash
1.8 trillion dollars. That’s the number you hear quoted most often for how much cash corporations are sitting on right now. With a more corporate-friendly environment in Washington, we could see companies start to loosen up the purse strings. That means changes like job creation as companies hire again, capital investment, IT upgrades and more. All — or really even a portion — of that money flowing back into the economy would give the recovery an enormous boost.
#4 – Interest Rates Stay Low/QE2 Takes Effect
Fed Chairman Ben Bernanke has pledged to do whatever it takes to keep the recovery going, so interest rates are likely to remain low in 2011. The newly announced plan to purchase $600 billion in government bonds is intended to lower borrowing costs for consumers and businesses even further.
Yes, I’m aware of possible dangers like inflation, but that would be much further down the road. For now, I expect lower interest rates to help businesses get and spend money to grow, which the Fed maintains will help the recovery gain traction.
#5 – The M&A Boom Takes Off
2010 has brought a spate of merger and acquisition activity: HP and Dell got into a massive bidding war over 3Par; Intel bought McAfee; Wal-Mart offered $4.26 billion for Massmart, a South African company; Southwest and AirTran announced a $1.4 billion merger — and that was just in August and September alone! Companies in search of growth in a weak economy are going to keep snapping up smaller companies to get it.
Look for M&A activity to really pick up in 2011. There are two ways to play this — buy takeover targets or buy the companies that will conduct the deals. I’ve been telling subscribers of my GameChangers advisory service to buy financial services company Evercore Partners Inc. (NYSE: EVR), which is quickly becoming the go-to firm for large industry deals.
Get Hilary Kramer’s specific buy advice on EVR here.
#6 – Restored Consumer Confidence
Third-quarter results came in better than expected for a number of retailers. A strong holiday season would go a long way to showing that consumers are feeling more confident and are ready to start opening their wallets again. Renewed consumer confidence would be a huge GameChanger in 2011, giving a positive boost to everything from retail to auto sales to restaurants to the travel sector.
Read Hilary Kramer’s 3 Holiday Spending Stocks Set to Surge.
#7 – The Individual Investor Comes Off the Sidelines
The indices have all seen massive gains since the March 2009 lows — and these gains have occurred largely without the participation of the individual investor. Too many investors are in real danger of missing more sizable gains as they park their money in anemic savings accounts, CDs and bonds (some actually at a negative yield now) waiting for signs of economic strength.
As that money starts moving back into stocks, it will provide further fuel that keeps the rally going strong.
#8 – Automakers Back from the Brink
Two years ago the American automakers were in dire straits and practically on the verge of collapsing. Today, Ford Motor Company (NYSE: F) — which did not take a government bailout — is beating Wall Street’s expectations left and right, announcing growth in sales and market share, GM is about to make their much-anticipated IPO and Chrysler, which didn’t even report third-quarter earnings last year, just announced that they cut their losses in half between Q2 and Q3.
#9 – Gold & Commodities Continue to Soar
Gold is going to keep climbing in 2011. In fact, I wouldn’t be surprised to see it touch $2,000 eventually. The Fed’s QE2 program will weaken the U.S. dollar further, ensuring that commodities will also continue to be hot in 2011. For example: There’s such a big market for platinum, palladium and rhodium right now that thieves are actually stealing catalytic converters to get at the precious metals contained in them!
You don’t have to turn to theft, however. The smart way for investors to profit from high commodity prices is to buy a company like metal recycler Metalico, Inc. (AMEX: MEA).
Hilary Kramer’s Year-End Game Plan — Plus 3 Top Stocks! The year-end rally is about to kick into high gear, but you must act now to lock in double- and triple-digit gains in the coming months. How? By owning the new market leaders. My Year-End Game Plan details 3 innovative and explosive growth stocks that I expect to deliver money-doubling gains in the next 3-6 months. Click here for your FREE copy.
