- Chinese investments would outperform.
- Large-cap stocks would outperform.
- Inflation would be rampant.
- Interest rates would rise substantially.
- Municipal bonds would experience widespread default.
- Gold would continue to rise.
- Oil would rise.
- This would be a stockpicker's year, meaning active managers would outperform.
- Next: China
We begin with China being the best place to invest. The SPDR S&P China ETF (GXC) closed 2010 at 76.24 and ended the second quarter at 78.33, a gain of 2.7 percent, With a dividend yield of about 1.6 percent, the total return was about 3.5 percent. Vanguard's index funds had following returns:
- Vanguard 500 Index Fund (VFINX) -- 6 percent
- Vanguard Small-Cap Index Fund (NAESX) -- 7.5 percent
- Vanguard Small-Cap Value Index Fund (VISVX) -- 4.9 percent
- Vanguard Value Index Fund (VIVAX) -- 6.3 percent
- Vanguard REIT Index Fund (VGSIX) -- 10.2 percent
- Vanguard Developed Markets Index Fund (VDMIX) -- 5.3 percent
- Vanguard Total International Stock Index (VTSMX) -- 3.7 percent
- Next: Large-Cap Stocks
- Next: Inflation
However, the core (ex-food and energy) increased at a much smaller rate. (The core is a much better predictor of future inflation due to the high volatility of food and energy prices.)
And finally, with oil prices having fallen sharply in June, it seems likely that the next report will not show signs of rapidly increasing inflation. Bottom line, the rate of inflation has picked up a bit, but has certainly not taken off. We'll give this a score of zero as it least the direction was correct. (Total Score 0+/2-)
- Next: Interest Rates
- Next: Municipal Bonds
So far, state and local governments have taken dramatic actions to prevent Whitney's forecast from coming true. And so far this year there have been few defaults. If the second half of the year looks like the first, her forecast will go down alongside BusinessWeek's 1979 forecast of "The Death of Equities" as one of the worst of all time. (Total Score 0+/4-)
- Next: Gold
- Next: Oil
- Next: Stockpicking
However, if hedge funds are any indication, we know how this will turn out. So far this year, hedge funds are lagging all major indexes.
- Next: Conclusion
Photo courtesy of Ethan Bloch on Flickr.
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