US ECONOMY SET TO RECOVER BY MARCH - It is a year for brave people to read how to take their money off cash and put it elsewhere. But this morning the managing partner of Bloxham Stockbrokers, Pramit Ghose, is giving a slightly contrarian note on the markets for 2009. Chief among them is a prediction the worst in the US will be over by March but a dire warning that a feature of this year will be the winding up of defined benefit pension schemes for those who still have them.
Mr Ghose says defined benefit schemes have to face up to reality and accept that some of them need to be wound up as employers can simply no longer afford 20+ contribution rates. He says that after last year's huge equity losses and with this year's bleak business prospects, many defined benefit schemes are likely to face massive deficits for active members as legally existing pensioners have first call on the assets.
Mr Ghose says that the US market could bottom out sometime in February about 10-15% below its current levels after what he called 'an abysmal reporting season'. He says the US economy may then show signs of stabilising, resulting in a market rally of some 35-40% over the next few months. But he points out that the rally - however strong - will not bring US indices back to their highs of about a year and a high ago.
Mr Ghose says that Dublin's ISEQ index is again likely to underperform the large global markets in the first nine months of this year. He says that global investors will continue to avoid Ireland as fears of a deepening recession are confirmed with unemployment rising to over 10% and continuing housing market woes.
But he does predict an eventual massive rally in the ISEQ - perhaps in the fourth quarter of 2009 - after a bottoming out in the property market, a successful recapitalisation of the Irish banks and a strong Yes result in a second Lisbon referendum.
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MORNING BRIEFS - The international price of oil stands at under $40 this morning - having lost almost $1 in value in overnight trade following some very grim unemployment figures from the US. The price of New York crude stands at $39.96. Brent oil looks expensive by comparison, standing at $44.50 a barrel.
*** The euro's slide against sterling and the dollar continues. This morning the euro will buy $1.3308 and 88.85 pence sterling. The slide ahead of Thursday's rates decision from the European Central Bank where the bank is expected to cut the main lending rate from 2.5% to 2%.
**** The main banking event this week is the appointment of a new chief executive at Anglo Irish Bank, speculated to be an internal appointment, before the bank's extraordinary general meeting of shareholders on Friday to approve the Government's recapitalisation plan which will see 75% of the bank owned by the country.
