My Chrystal Ball Predictions For The Economy and Your Wallet In 2010

by Hank Coleman

I thought that it would be kind of fun to give you a prediction of where I think the economy and several of the leading economic indicators, like the Dow Jones Industrial Average that directly affect our wallets, would be at the end of the year on December 31st, 2010.

So, below are my predictions for the end of the year…

  • Stocks will run out of steam and slow to a normal growth rate of 8% gain again in 2010.  The S&P 500 Index will end at 1,250 and the Dow Jones Industrial Average will finish this year at 11,500.
  • Unemployment will finish the year at 8%.
  • We will see the end of the popularity of frugality.
  • America will see a steady, healthy 3% inflation rate.
  • Home values will stabilize and return to 3% annual growth.
  • The Federal Reserve will raise the Federal Funds Rate to 0.75%.
  • GDP growth in the US will return to 3%.
  • Mortgage rates and the interest rate on the 10 Year Treasury will increase, steepening the yield curve. The 30 Year Fixed Mortgages will be at a 6.0% interest rate by the end of the year.
  • One of the Big Three automobile manufacturers in Detroit will file for bankruptcy again! Maybe it will be Ford’s turn now.
  • The personal savings rate in America will continue to fall and finish the year at 1.5%.

No one knows what the future holds, of course.  But, I thought that it would be fun to have a little guess.  I will revisit these key economic indicators every quarter and on December 31st to keep track of how my predictions pan out.

I also asked some of the brightest and most respected personal finance bloggers, CFPs, and investing junkies around where they thought the Dow Jones Industrial Average would end up on December 31st, 2010.

Below are some of their predictions….

J Money of BudgetsAreSexy – 11,000
June Walbert, CFP of USAA – 11,025
Wojciech Kulicki of Fiscal Fizzle – 10,650
Philip of Weakonomics – 11,000
FFB of Free From Broke – 11,250
Mr. Tough Money Love of Tough Money Love – 10,800
PT of PT Money – 11,000

Patrick from CashMoneyLife told me what a lot of personal finance bloggers think and feel, “Predicting markets is just like predicting the weather, throw up enough possibilities and something will stick. That’s why I try to avoid listening to the talking heads on TV, who conveniently take both sides of a story so they are always covered. Instead of focusing on a number for the Dow, I plan on improving my personal financial situation to be prepared for anything that the markets throw at me.”

The Dow Jones Industrial Average is not the best primer for how well the overall stock market is doing. There are a lot of flaws in the number. It is only comprised of thirty companies for exampler. But, it is definitely fun to guess what the future holds. So, what do you think? Where will the Dow Jones Industrial Average be at the end of this year? Leave your prediction below…

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{ 5 comments… read them below or add one }

FFB January 4, 2010 at 11:07 pm

Predictions can be fun but they shouldn’t be taken too seriously. If you invest, it should be in companies that are expected to be good for the long haul. For sure 2010 will be an interesting year to see what happens. Hopefully interesting is good and not bad.

Patrick January 5, 2010 at 9:34 am

I definitely agree with FFB. An index number should change how you invest – it’s only a general indicator, and individual investments will vary a lot. Overall, I think there will be a lot of opportunity this year, but people need to make their finances a priority and not let a recovering economy mask any areas of concern in their portfolio.

Daniel January 5, 2010 at 2:16 pm

Although I hope the market remains weak in 2010 (and 2011 so my student loans will remain at extremely low rates), I think the DJIA will increase more than these people predicted, maybe to $11,500.

J Money January 5, 2010 at 8:22 pm

Wow, lots of us guestimates around 11,000.
I should have gone crazy and said 12,000 😉

Happy New Year brotha.

Daddy Paul January 11, 2010 at 8:53 pm

“One of the Big Three automobile manufacturers in Detroit will file for bankruptcy again”
I don’t think so but you may see General motors back crying for more money. They may get it too because they are owned by the taxpayer.

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