2009 stock market outlook

Before I start writing this post, I was reading some articles and comments on the year ahead. Usually, at the beginning of each year, investor would do some reflection and try to position the portfolio for the coming year.

The consensus now seems to be the earliest recovery would be on second half of 2009.

Would it recover by 2009?
This is a really big question. Just like we don't know the danger ahead until we encountered one. Similarly, we are not so sure whether the recovery would happen this year. However, looking at the economic numbers and analysts comment. The sentiment or real picture is actually quite bad. One fund manager mentioned he mentioned seen a bad cycle like this.

I guess we can take cue from this. The earliest time the economy would start to recover seems to be 3Q onwards. However, I am not so optimistic. Just like they mentioned, the problem is quite serious. It would take sometime for the de-leveraging to flow through the economy. This year most likely would be a lost year again. The real recovery would most likely happen in 2010 instead. Year 2009 should be a year of consolidation.

Volatility ahead
Should investor stay sidelined? It depends on your strategy. Many believe we could still have bear rally. Just look at what we had for past few weeks. Few piece of good news could cheer the market up and market picked up. Soon it run out of steam and consolidate. One who is able to constantly monitoring, could use this pattern to have meaningful trading. Since the stock price is "low enough", if you get caught, can still wait for longer term, provided your trading base on fundamentally strong company.

Next checkpoint
Company result would be out Feb or so. Maybe by that time, we shall know the degree of problem and we can estimate base on that. Surprises abound, long term investor better keep the eyes open. I would prefer to take another closer look at Q3 to see whether economy is showing sign of recovering and make my decision. Meanwhile, the extreme swing in the next 6 months, might be worthwhile to pick up some real bargain. Because when you are certain recovery is on the way, the price would have already come out of bottom. Averaging is a better investment strategy at this time.