2. Under pressure from slowing consumer spending, disappointing capital spending and higher commodities, corporate profits drop 10% in 2008. Importantly, the pattern of economic activity grows increasingly inconsistent and lumpy, providing a difficult backdrop for corporate managers and investment managers to navigate. 3. The S&P 500 Index falls by 5%-10% in 2008, and 2007's laggards and leaders continue to be the same laggards and leaders in the coming year. 4. With a continuation of the credit and liquidity crises and an increased recognition that financial retrenchment will take years (not months), volatility pushes even higher. Daily moves of 1%-2% become more commonplace, serving to further alienate the individual investor. 5. The Federal Reserve embarks upon a series of moves to ease monetary policy in 2008. Nearly every meeting is accompanied by a 25-basis-point decrease in the federal funds rate even despite continued inflationary pressures. Nevertheless the economy fails to revive as the Fed pushes on a string. 6. Growth in the Western European economies deteriorates throughout the year, and the markets in England and France drop at twice the rate of the U.S. market. 7. The Chinese juggernaut continues apace and, despite continued protestations of a market bubble, the Chinese market doubles again in 2008. 8. The Japanese market puts on a surprising resurgence as the world's investors respond to compressed valuations (vis-à-vis peer regions), reasonable multiples (absolutely and against Japanese bond yields), accelerated M&A activity, share buybacks and relative strong corporate profit growth. 9. The administration's proposal to revive the housing market falls on its face (as the housing bust accelerates), and President Bush enlists a well-placed Democrat and former cabinet member to become the U.S. housing czar, who has the primary charge to propose and administer a massive Marshall Plan for housing. Several high-profile housing-related bankruptcies occur in 2008, including Countrywide Financial ( CFC), Beazer Homes ( BZH), Hovnanian ( HOV), Standard Pacific ( SPF), WCI Communities ( WCI) and Radian Group ( RDN).