Here's a list of trends that may play out, both expected and unexpected.
New jobless claims peak in the second quarter; net job creation takes two to three more quarters. The largest U.S. employers make their biggest restructuring moves by the end of March. A surge in bankruptcies among large and small firms pushes the peak of new unemployment claims out into the second quarter. The Obama stimulus plan helps to create positive employment numbers in the second half of 2009, but private sector employment doesn't start to build up steam until 2010 or 2011.
Fueled by another large deal, airline stocks deliver the strongest gains. Although demand for air travel remains fairly weak, the sharp drop in oil prices, coupled with recent large headcount reductions, enable the sector to generate an impressive earnings snapback. Investors come to view the sector as poised for record profits when the economy rebounds. Noting the impressive synergies ultimately derived from the merger of Delta (DAL - commentary - Cramer's Take) and Northwest, Continental (CAL - commentary - Cramer's Take), UAL (UAUA - commentary - Cramer's Take) and/or Southwest (LUV - commentary - Cramer's Take) seek out deals.
Steve Jobs gets kicked upstairs. Realizing that investors are overlooking Apple's (AAPL - commentary - Cramer's Take) management bench strength, Steve Jobs relinquishes the CEO title and remains as Chairman, as Microsoft's (MSFT - commentary - Cramer's Take) Bill Gates did a few years back. Shares of Apple drift lower in the first half of the year as rivals roll out increasingly competitive new products. Shares of Apple post a solid second-half rebound as the company introduces its next breakthrough device. Apple's 2008 decision to open up application development to third parties spawns a range of hot-selling new uses for the iPhone in 2009.
Brazil becomes an investor magnet. Global investors begin to differentiate Brazil from China and India, highlighting Brazil's strong finances, impressive agricultural and oil output and anchor status in South America. The Bovespa posts the strongest record of any major index, augmented for U.S. investors by a strengthening in the real against the dollar.
Venture capitalists start to get anxious. With pensions and endowments looking to pull some money out of venture capital funds, the venture capitalist firms seek ways to monetize their holdings. As the IPO market remains largely closed, they seek out large public tech companies to buy out their stakes at large discounts to recent financing rounds.
The British and Japanese economies are among the weakest in 2009. Britain's consumer hangover proves to be as deep as the U.S.'s, but a relative lack of stimulus leads to an even deeper economic contraction in the U.K. The British pound weakens anew to multi-decade lows, enabling tourism to be one of the country's few bright spots. Japan's strengthening currency creates even more pressure on the nation's exporters, while rapidly aging Japanese consumers grow even more cautious. The current government, which has few viable options, comes under fire, leading to early elections.
The housing crisis is prolonged as investors look past the "new home formation" myth. While economists currently anticipate a spike in housing demand as the inventory of unsold homes should meaningfully shrink, they will eventually trim their rosy expectations as the weak economy leads many twentysomethings to stay with their parents. As a result, the percentage of people owning their homes falls more than 400 basis points from the recent peak, to below 64%. Offsetting this, very low mortgage rates stimulate rising demand from creditworthy buyers, which frees up savings by refinancing at lower rates.
Community college enrollment soars. Many cash-strapped parents conclude that they should save money by asking their kids to start at a local two-year school before transferring to universities after the first or second year. Enrollment at many major universities falls, leading to cash flow pressures and service cutbacks.
The biotech industry reaches a crisis point. Many promising biotech drug trials are trimmed or halted as the companies move to conserve remaining cash. M&A and joint venture funding provides a lifeline to the most promising later-stage drugs, but earlier-stage speculative drug development grinds to a crawl. A large drug company, such as Merck (MRK - commentary - Cramer's Take) or Pfizer (PFE - commentary - Cramer's Take), chooses to change its business model and deploy its strong balance sheet to aggressively build biotech pipelines.
Exogenous shock leads to capitulation. An unforeseen jolt to the market, such as a terrorist event or a natural disaster, leads to a sharp selloff, allowing many to finally and correctly call a market bottom. The next bull market begins. By the end of 2009, investors flock to small caps, as they have done near the end of previous downturns.
P.S. Will you be there when Cramer makes his next move?
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David Sterman has been an equity analyst and financial journalist for 15 years, most recently serving as Director of Research at Jesup & Lamont Securities.
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