Leading Firm Predicts Trends

Global Insight,a leading consulting firm,has issued its forecast for 2008:1.The U.S. will come close to a recession.2.Global growth will slow.3.China will continue to grow rapidly.4.Oil prices will remain high.5.U.S. inflation will drop.6.The Federal Reserve will keep cutting interest rates.7.U.S. housing will bottom out.8.The U.S. trade deficit will improve.9.The U.S. dollar will strengthen.10.The U.S. economy will be vulnerable to shocks.In its weakened state,a shock such as a spike in oil prices or deeper subprime losses could tip it into recession.Phillip Roth of Miller Tabak,another prominent firm,says we are in the middle of a bear market.It is only an average bear,not a killer bear.We will take another hit in the first half of 2008.There will be cyclical leadership again,such as industrials,energy and agriculture.The market is adjusting to slower economic growth.You should have more than your usual amount in cash,so you can take advantage of opportunities that will arise in spring.Professionals didn't want to raise their cash levels,so we are stuck for now.They kept reinvesting their cash,and so there is little available to start a rebound.There seems to be a consensus that the first half of 2008 will see more of the same financial trouble,but we may hope for some improvement by the end of the year.Until then,one possibility for cash is a Charles Schwab(SHWB) no-minimum checking account,which is paying 4% and comes with a no-minimum brokerage account.Shares of Charles Schwab increased in value by 32% last year,leading the brokerages.