Surprises in Store for 2004

3. Facing rising energy prices, the automobile industry's fortunes erode dramatically as the consumer is nonresponsive to further incentives. Ford (F Quote) loses more than $1 billion in the second quarter of the year. William Ford Jr. steps down.

4. With the cost of capital declining to unprecedented low levels, a relatively quick restoration of order in South America and the emergence of an overall calm in Iraq (as President Bush orders more troops in to stabilize that country), merger activity explodes and stock prices follow suit. The world equities markets end the year nearly 30% higher than the May lows and close at about 15% higher than year-end 2003 levels. Financial stocks and, briefly, oil stocks are the principal market leaders, but technology stocks languish throughout the entire year (portability proves to be a nonevent) and end the year slightly lower than at 2003's year end.

Internet stocks prove to be one of the worst performing sectors of the market, after New York Attorney General Spitzer sues eBay (EBAY Quote) and Amazon (AMZN Quote) for nonpayment of state sales taxes.

Despite a widespread belief that housing activity will fall off the cliff, the rise in home prices (fueled by ever-lower mortgage rates) continues apace and begins to resemble the bubble in the Nasdaq of the late 1990s.

5. Beginning at midyear, Genworth Financial, the General Electric spinoff, embarks on a series of high-profile acquisitions (which include CNA Financial (CNA Quote), Fidelity Financial and H&R Block (HRB Quote)), spurring an unprecedented round of industry consolidation in the financial sector.

6. After the minipanic in the markets in the first half, and in response to Genworth Financial's takeover announcements, the following acquisitions are announced and consummated:

• Merck (MRK Quote) acquires Schering-Plough (SGP Quote).

• Fidelity acquires Janus (JNS Quote).

• News Corp. (NWS Quote) and MGM Mirage (MGG Quote) acquire a loss-ridden DreamWorks.

• J.P. Morgan (JPM Quote) acquires Countrywide Credit.

• Fifth Third Banks (FITB Quote) acquires National Commerce Financial (NCF Quote).

• Wachovia (WB Quote) acquires First Tennessee (FTN Quote).

• GrupoTelevisa (TV Quote) acquires Univision (UVN Quote).

• Wells Fargo (WFC Quote) acquires Capital One (COF Quote).

• Tyco (TYC Quote) acquires Toll Brothers (TOL Quote).

• Citigroup (C Quote) acquires Alliance Capital (AC Quote).

• Polo Ralph Lauren (RL Quote) is acquired in a leveraged buyout.

• Nike (NKE Quote) acquires Gap Stores (GPS Quote).