Smart Money

William C. Fisher

So 2010 is almost a distant memory now. How did market predictions fare in 2010, and what can we expect the rest of this year? As the CFO or CEO of a long-term care facility, you need to work with the finance committee to ensure investment policy statements reflect long-term goals and strategies. Reading what seasoned investment experts are predicting may help guide you.

Jeremy Siegel, author of “Stocks for the Long Run,” predicted interest rates would rise, housing inventory would dwindle, and strong economic growth would give equities a good return in 2010. Robert Genetski, a leading classical economist, predicted a sharp increase in spending, rising stock prices and credit scarcity.

Here is what happened financially in 2010: Commodities outperformed both stocks and bonds, rising 30%; emerging market stocks increased by 19.2%; and high-yield bonds grew 15.1%, outpacing the broad bond market at 6.5%. (All data represent total return including dividend reinvestment. Data are from MSCI-EAFE, DJ-UBSCI, EcoWin and Barclays High Yield indexes.)

What have people been predicting for 2011? Ed Hyman, a leading economist, forecasts a quick economic recovery in the first quarter, with an increase in GDP, decrease in unemployment, and rising bond yields. Diane Swonk, whom the Wall Street Journal named one of the country's top forecasters, says home sales will stabilize, unemployment will remain above 9%, inflation will not hit and the stock market will rise above 12,000.

You need to remember all the above are only predictions.

Here is a positive closing thought from Stock Traders Almanac: “Dating all the way back to Andrew Jackson in 1833, the stock market has seen an average one-year gain of 10.5% during the third year of a Presidency.” I recommend you work with your investment adviser to review the investment policy statement for any necessary rebalancing.

William C. Fisher is president of Investment Advisory Group LLC, a business development company partnering with some of America's leading financial companies to provide independent financial services to nonprofit organizations.