Outlook

The U.S., and indeed most of the global economies, faces a transition period in 2010, one that must be carefully handled. While the equity and fixed income markets have generally recovered structurally from the crisis of 2008, the recovery has been accomplished through government support and subsidy. But this support system is tenable only in the very short run and the global markets must move back to “normal” operations. But with still weak economic growth, high unemployment and an overleveraged consumer, that transition will be difficult at best domestically. The outsized gains in domestic fixed income and the emerging markets are highly unlikely to be repeated in 2010, or any time in the near future. Investors should moderate their return expectations going forward. For the average investor, this environment dictates an increased awareness of risk tolerance and dedication to risk management. Nathan Behan is a senior investment analyst at Prima Capital Holding Inc., a provider of investment research, technology and portfolio design to the wealth management and retirement industries.