2009 will marked by a deep recession, that won’t show any signs of abating until 2010. There will be at least one more major financial corporation that bites the dust, as resets and foreclosures continue. Commercial real estate will show more signs of weakening and further exacerbate banks’ balance sheets. Some smaller countries around the globe that became over exposed, may go into tail spin. House prices will fall another 20% by 2010. Growth will be slow for several years to come as the Democrats try to reduce debt levels, so housing prices will bottom and remain static for some time. I suspect in SD, cheaper SFHs and Condos will see an earlier recovery (mid 2009), as affordability pushes more money at the lower end of the market.
Oil demand will never recover properly, and foreign car marques will ride rough shod over US auto manufacturers, producing smaller, more fuel efficient cars. OPEC will continue to reduce supply.
Although the US dollar will fluctuate as fiscal policy tries to stabilize the economy, it will still be seen as a safe haven and won’t collapse. US Treasuries will probably be the only investment to show some sort of resilience. Cash will reign supreme.
Further into the future, I see a shift in urban planning towards more centralized towns with an emphasis on closer knit communities, public transportation, and farmers markets. I don’t see huge reductions in costs of energy and health care, and this will force many baby boomers out of expensive states like California.
Troops will move out of Iraq and focus on Afghanistan, and Pakistan will become a focus of attention in the fight on terror. The tension between India and Pakistan will reach fever pitch, and will need very deft international mediation to avoid a major conflict. Israel looks intent on continuing it’s hard line on Hamas, so 2009 is unlikely to be a peaceful year, which won’t help markets.
If 2008 was ‘annus horribilis’ for the financial sector, the cancer will have spread to vital organs by 2009. If you were thinking of taking a long vacation, or taking out a few years to travel, now would be a good time.
