4. The natural gas rally no one sees coming
Although the U.S. Northeast was pummeled by Hurricane Irene last summer, the rest of the country has dodged a bullet in recent years. It's been several years since a major hurricane damaged the drilling rigs in the Gulf of Mexico.
But water temperatures in the Atlantic basin remain elevated, which helps explain why we had four named storms in June -- the highest number on record.
If the trend persists, then there's a decent chance that one of this summer's big storms is perfectly situated to wreak havoc on the Gulf of Mexico's energy complex. The last time that happened, in 2007, natural gas prices surged.
This time around, it's imprudent to expect a huge jump in natural gas prices because onshore production is much more robust these days.
Still, natural gas is already on the rise -- jumping from under $1.95 per thousand cubic feet (MCF) in late April to a recent $2.80. An active hurricane season could easily push that figure toward $3.50 or even $4. This would bring a huge sigh of a relief for gas drillers that were buckling down for a long-term phase of $2 natural gas.
5. Massive banking consolidation
One of the unintended consequences of the pending Dodd-Frank banking legislation is that it will make it very difficult for local banking franchises (those with fewer than 100 branches) to earn sufficient profits while complying with the costly regulations.
As a result, look for leading regional banks such as
and others to go on a buying spree. Analysts will see these deals as immediately accretive and rising profits should set the stage for a solid rally in these regional banks late this year and into 2013.
Just as is the case with mega-banks, these regional banks are currently quite inexpensive, typically trading for around 10 times earnings and right around book value.
An improvement in the housing sector, a growing sense that the U.S. economy will remain in growth mode in 2013 and the aforementioned merger and acquisition benefits should all provide tailwinds to this sector.