Trying to find a common thread in the differing views on the stock markets for 2010

Franocois Moute (chairman of Neuflize, ranked by Citywire as most consistent and best-performing North American equity manager over the past 5 years):

Positioned for a market with limited upside and slightly more downside potential. A trading range for equities, but gold mining and energy will have very good potential. Currently, long in "gold-mining" and energy stocks. Have started hedging portfolios by shorting index futures. Expects gold to continue moving up. Long term interest rates will go up next year and that will limit the stock market rally.

Favoured stocks:
Barrick Gold Vorp (gold mining)
Schlumberger (oil services)
Transocean (oil services)
Mosaic (agriculture)
ArchDaniels (agriculture)
Bunge (&agriculture)

In 2010, he expects more inflation, economic recovery petering out, higher interest rates. More importantly, the global financial crisis getting out of control once again. Decoupling process is not far enough to enable emerging countries to keep growing without the Western world, so if the Western world plunges into recession again, the whole growth story would be derailed.



Chua Soon Hock (who is featured in my earlier blogs): Current bull market unsustainable. Developed countries would have exhausted their monetary and fiscal 'bullets' while emerging markets like China will have banking bad loan problems in the next down cycle as asset bubbles burst (see Andy Xie article in Dec 2009). By end 2010, stock markets could be down by 20% from current levels. 2009 and early 2010 might be the last autumn of golden yellow before the onset of a long cold winter, and some time in 2010 may be the start of the second leg of the global bear market, which started in late 2007. Would adopt an extremely conservative strategy of trading, maintaining a high cash level, and do small, non-leveraged, contrarian and flexible trading. Does not rule out super bubble in gold in 1H 2010.

Remember that Chua correctly predicted end 2007 that stock markets would dive, and end 2008, that China stocks would rally. Would he be right this time round?


Marc Faber (another favourite of mine):
Gold will continue to appreciate. We will not revisit the lows in March 2009. Gold mining and oil stocks still look interesting for another 3 months at least. Also like agriculture. At some point, the stock markets will drop by at least 25% but not to the new lows below March 2009.

Favoured stocks:
Gabriel Resouces
Ivanhoe Mines
Nova Gold

Marc Faber, if we remember, also correctly called the end of the bull market in end 2007 and the start of the bull market in March 2009.

Allan Conway (Shroeders): In the short run, about 3- 6 months, some dollar strength due to interest rate increase and US economy recvering. But over a two to three-year plus view, dollar weakness.


So what does this imply for my trading:

1. It has to be disciplined.
2. Be prepared for trend changes, particularly in US$ and stock markets.
3. Catch the right sectors for rebound : Gold, oil and agriculture. Personally, I think investing in commodities, banking and property sectors in Singapore market gave me a good enough return.