The economy will continue to weaken, but the financial markets will look at the steps taken by the federal government and react in a positive fashion, Mr. Vahanian said.
JEFFREY C. VAHANIAN
President
Vahanian and Associates Financial Planning Inc.
Saratoga Springs, N.Y.
Assets under management:
$88 million
Forecast:
The economy will continue to weaken, but the financial markets will look at the steps taken by the federal government and react in a positive fashion, Mr. Vahanian said.
The $700 billion Troubled Asset Relief Program has been subject to great criticism, but "it was a necessary tourniquet at a time when we were bleeding to death," Mr. Vahanian said
Part of the problem with the bailout was the lack of any astute salesmanship from Washington, Mr. Vahanian said. But when Barack Obama becomes president, the mood could change for the better, he said. "Faith is part of markets," Mr. Vahanian said. "Obama can reinvigorate hope in the markets once again."
The 2009 finish line:
The Dow: 11,400
The Nasdaq: 2,100
The S&P 500: 1,170
Tip sheet:
Favorite fund: iShares S&P Global Technology Sector ETF (IXN).
Favorite sector: Technology.
Next big thing: An "unexpected event" that could harm the economic recovery.
Biggest concern: Waiting for the unemployment and job picture to turn.
Reading, watching, listening to:
Book: Notes and missives of legendary investors Warren Buffett and Bill Gross.
TV: CNBC, Bloomberg.
—Bruce Kelly
LARRY LETTERIO
President
Peregrine Advisers Inc.
Wexford, Pa.
Assets under management:
$300 million
Forecast:
The fund of funds manager is "moderately positive" about equities in 2009, expecting a strong year-end finish after a slow start. But the fixed-income market — particularly the distressed corporate-bond area — offers the strongest opportunities in the year ahead, he said.
"There are so many [companies] that were typically investment-grade now trading at distressed levels," Mr. Letterio said. He's looking for returns of around 1% or a little better on the battered bonds.
He sees two positive forces shaping the investment climate in the year ahead: the vast infrastructure spending stimulus promised by the incoming Obama administration, complemented by the Federal Reserve's continuing fiscal stimulus.
The negative force is "the very real risk of deflation," he said.
The credit default swap market also remains an ominous overhang. "The government doesn't have a balance sheet big enough to fix the CDS market if it goes upside down," he said.
The 2009 finish line:
The Dow: Up 9%
The Nasdaq: Up 6%
The S&P 500: Up 7%
Tip sheet:
Favorite stock: Fluor Corp. (FLR).
Favorite sector: Infrastructure.
Next big thing: Government policies favoring infrastructure projects.
Biggest concern: Deflation, and a tough year for materials and energy stocks.
Reading, watching, listening to:
Newspapers: The Wall Street Journal, Barron's, InvestmentNews.
TV: "Monday Night Football."
Primary news source: Bloomberg.
—Jed Horotwitz
DR. ANDREW W. LO
Founder and chief scientific officer
Alpha Simplex Group LLC
Cambridge, Mas.
Assets under management:
$800 million
Forecast:
"I think you'll see gridlock in the economy for the first two quarters of 2009," Mr. Lo said.
In the third or fourth quarter, he thinks think money will come back to the industry with a vengeance. Pension funds are going to realize that their asset allocations are out of whack, Mr. Lo said.
"I think the policies being discussed now are aimed an unfreezing the debt market. Once that becomes more liquid, bonds will start trading again. That will start an onslaught of managers in risk taking activities," Mr. Lo said.
The 2009 finish line:
The Dow: 8,600
The Nasdaq: 1,600
The S&P 500: 950
Tip sheet:
Favorite fund: Natixis ASG Global Alternatives Fund (GAFAX).
Favorite strategy: Global macro, distressed and equity market neutral.
Favorite sector: Green energy technologies.
Next big thing: "Beta replication, which involves the ability to sell short and take on common exposures like currency or commodity risk."
Biggest concern: "My concern is that the policymakers won't move quickly enough to restore confidence in the marketplace."
Reading, watching, listening to:
Book: "Hot, Flat and Crowded; Why We Need A Green Revolution — And How It Can Renew America" by Thomas L. Friedman (Farrar Straus & Giroux, 2008).
TV: CNN.
Radio: National Public Radio.
Websites: wsj.com, nytimes.com, ft.com.
—Sue Asci
CHRISTOPHER M. LAMB
Principal
Old Mission Investment Company LLC
Traverse City, Mich.
Assets under management:
$233 million
Forecast:
Market predictions have little value for Mr. Lamb, but he is willing to hazard a guess that later this year, "we may see a glimmer of hope that the world is not going to zero." At that point, a vigorous rally could ignite, he said.
He is also optimistic about the corporate-bond market. Government bonds are too pricey, "but I think you could see ... equity-like returns out of a good-quality corporate-bond portfolio" even if stocks languish, he said.
The 2009 finish line:
The Dow: 10,400
The Nasdaq: 1,840
The S&P 500: 1,060
Tip sheet:
Favorite sector: Financials.
Next big thing: Mutual funds that offer active pricing for purchases and sales during the trading day.
Biggest concern: Losing a generation of investors who have exhausted their patience with the equity markets.
Reading, watching, listening to:
Book: "The Snowball: Warren Buffett and the Business of Life" by Alice Schroeder (Bantam Books, 2008).
Websites: bloomberg.com, cnbc.com.
