READING THE MARKETS

After all we saw in 2008, what's next for 2009? Not surprisingly, investment pros and economists contacted by the Rocky Mountain News are all over the map in forecasting what will happen to your portfolio this year. Highlights from our e-mail survey:

What kind of return do you see for the S&P 500 in 2009?

Gregory Anderson, CEO, GRAnderson Wealth Management Group

With many investors on the sidelines holding cash, poised to invest, I suspect that we could see a 25 percent to 30 percent increase in 2009.

Andre Ratkai, Praxis Advisory Group

The S&P 500 is likely to see a total return in the 10-15 percent range, recovering only part of 2008's loss. While stocks have suffered a historic drop in 2008 and many stocks are at low valuations, the brunt of the recession is just now unfolding. That will keep a psychological lid on the enthusiasm to buy stocks, prompting investors to wait for clear evidence of recovery before embracing stocks again.

Jeff M. Wilson, Wilson Advisory Group

Zero. Sometime during 2009 the Dow will fall to 5,000 and the S&P to 400. After the panic, there will be a glimmer of hope. It may come from the new stimulus package, an improvement in some economic data, Obama's ability to inspire hope and confidence or Wall Street's declaration that it can't get any worse; we will return to January 2009 levels by December 2009.

Did we see the bottom for stocks in November?

Dennis Clark, Capital Asset Management

I believe we did. The market tested the high 7,000s to low 8,000s on two occasions. Also there were days when the market was up or flat on bad economic news. It tells us that when that happens news is priced into the market.

Fred Taylor, principal, Northstar Investment Advisors

I hope we saw the bottom in November, but I seriously doubt it. Typically markets find a bottom after retesting the lows more than once and not when everyone has predicted that the bottom has already happened, which is the case today.

Barbara Walchli, Aquila Rocky Mountain Equity Fund

Stock market breadth (number of new lows) bottomed on Oct. 10, while most of the indices bottomed on Nov. 20.

We think we have seen the worst.

What quarter of 2009, if any, do you see the U.S. emerging from recession?

Gregory Anderson

Although there are plans to jump-start the economy through further government stimulus packages, we probably won't see any true economic growth until mid-2010.

Barbara Walchli

The U. S. economy is likely to emerge from recession in the third or fourth quarter of 2009. Lower energy prices, lower mortgage rates and a stimulus bill should help consumer confidence. More tax and economic policy clarity from the Obama administration over the next few months should help consumers and businesses to make investment decisions which should help to move the economy forward.

What are some appealing sectors - and, please pick a stock that looks attractive to you now.

Michael Serota

I like Bank of America, New York Community Bank, and if you can find General Obligation triple-A-rated municipal bonds, they most likely have very attractive yields and tax advantages.

Bill Greiner, chief investment officer, UMB Financial

Rather than focus on sectors, we would rather focus on dividends, the growth of dividends and the sustainability of those trends. Since the 1920s, more than 40 percent of the total return from U.S. stocks has come from dividend payments. We are finding a number of high-quality companies who we believe will retain their current dividend flows and increase these going forward. Actual examples of this type of idea are CAT and AEE.

David A. Twibell, president-wealth management, Colorado Capital Bank

I think there are some real opportunities in infrastructure-related stocks, commodities and investment grade corporate bonds. Some attractive stocks include McDermott International, Caterpillar and NYSE Euronext.

Andre Ratkai

Appealing sectors for 2009 include: gold (Randgold and Royal Gold); military defense (Raytheon and EMS Technologies); pollution control (Tetra Tech and Insituform); and major construction (Granite Construction and Jacobs Engineering).

What are the things the Obama administration should do in its first months to improve the economy and capital markets?

Don Cassidy, president, Retirement Investing Institute

Targeted tax credits such as for buying USA-made cars with high MPG ratings only. Conversely, add a 10 percent tax on purchases of SUVs etc. Credits for solar installations. Increase the deductible capital loss amount for a year or two, from its present $3,000 per year. Pass a moratorium on mandatory distributions from IRA plans, so people are not forced to lock in their losses by taking withdrawals near the lows. Stop all federal purchases of vehicles with conventional gasoline engines, forcing Detroit to make the switch as fast as possible. Reduce aid to states that do not do likewise. Take advantage of the low gasoline prices by raising the fed gas tax by 1.5 cents/month until price hits $3.50 again. Use the added revenue for deficit reduction and road/bridge projects, 5 0/50.

Jerry Paul, Quixote Capital Management

I think the Obama administration should come out with a two-prong attack on the housing crisis. The first would be something similar to the plan Treasury has floated with respect to creating availability of 4.5 percent 30-year mortgages of up to $1 million. In this case, the plan should be available to all homeowners who have remained current on their existing mortgage. The second prong requires addressing the foreclosure problem. On this, I would defer to FDIC Chair Sheila Bair's ideas.

Michael Williams, professor of finance, University of Denver's Daniels College of Business

What the new administration should not do is raise taxes on those business entities that can provide for future economic growth. By raising taxes on "individuals" earning more than $250,000, the government is reducing the amount that small businesses have to plow back into the business. S-corporations and partnerships pay taxes on 100 percent of the organizations' earnings but rarely pay out 100 percent of the earnings. The difference is the amount of additional investment in the business. If taxes are increased, the business will have to pay out more to the individual owner to cover taxes, thus leaving less to use for growth of the small business.

How important is the recent decline in the price of oil for business investment and consumer spending in 2009?

Michael L. Serota, senior vice president-investments, Raymond James & Associates

Huge. This is the biggest economic stimulus package that there could be. Oil in the low to mid-$30s, corresponding to $1.50 per gallon, is the cheapest gas has been in multiple years. Just six months ago, clients were telling me that we would "never" see $2-per-gallon gas in our lifetime again. Reaffirming that conventional wisdom is usually wrong.

Warren Olsen, First Western Trust Bank

While the recent decline in oil prices (and the attendant decrease in gas prices) gives some relief to the consumer, I don't think it is going to have a major effect on the economy. Oil is not a major part of our economy in terms of the business sector, and for the consumer it is all going to be about getting debt under control and then confidence about their jobs.

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