ING Investment Management executives are more optimistic about the prospects of the U.S. economy and equities than many other financial forecasters.
In a breakfast briefing on next year’s economy and markets, Paul Zemsky, head of the asset allocation and multi-manager investments, predicted that the Dow Jones Industrial Average could grow 10% to 15% next year and the S&P 500 could reach as high as 1275.
Gross domestic product could grow by 2.8% in the first quarter of 2010 and about 3% for all of 2010, Zemsky added. Stocks and riskier assets should perform well. “We will see people moving money from bonds to stocks,” he said.
At the same time, he forecast consumption at 2.5%, despite still rising unemployment numbers. Saying that the recovery will continue to be mild, Zemsky added that “there will be no double-dip in 2010.” He added that “inflation is absolutely not going to be a problem over the next couple of years.” As a result, the Federal Reserve will leave rates alone, he said. And, for those concerned about the federal deficit, Zemsky said it “won’t come home to roost in 2010.”
Still, the average consumer is still responding to the pain of the recession despite the fact that the economy appears to moving in the right direction. Unlike more optimistic prognosticators on the savings rate, Zemsky said: “We don’t see the savings rate going to 8% anytime soon.”
Zemsky’s colleague, Uri Landesman, head of global growth, added that the consumer is still in the midst of the recession even if the markets emerged from it last July. Landesman said that unemployment would peak by late January or early February.
Landesman also cited the fact that China and other emerging markets have recovered more strongly than the United States.
As for sectors that ING prefers in the near future, Landesman pointed to technology, saying that many companies would be looking to improve their equipment and software after holding down spending for several years.