Where Is Wall Street Headed In 2010?

Wall Street has had a spectacular 2009 if you consider that it is up almost 61% from its March bottom and almost 20% YTD.But the picture is not so pretty if one were to go back a bit in time.Over the last ten years investment in stocks has yielded negative returns.Forget the hype over the likes of Google and Apple for a while,$10,000 invested in 1999 is worth only slightly over $9,000 today.On the contrary the same amount invested in bonds or the 'dead asset' gold would have doubled or tripled your money in the same time.Anyway,where do we go from here.Opinion is divided.Several analysts expect the party to continue.They point to the continued Fed support and its reluctance to raise interest rates as prime reasons for the Dow to keep climbing.Others are not so sure.They say that current stock prices simply do not justify the growth and employment numbers being reported.It is argued that a large part of the growth so far is due to the cash for clunkers and the home buyers credit schemes,and therefore the present rebound is not sustainable.While conceding that the economy is 'back from the brink' and that all indicators point to it being headed in the right direction,it is said that economic growth will at best remain weak in the coming year.

The reasons for this pessimism are simple.Unemployment remains high and the real estate market is expected to remain weak till well into 2010.Another important reason is that Americans have started to save again!From a savings rate of almost zero it has now gone up to almost 4% and is expected to rise to 8% as people try to repair the damage to past savings and also prepare for possible unemployment.For an economy which is almost 70% made up of consumer spending this is bad news.And finally the Fed is only too aware that it cannot keep printing money without inflationary pressures building up.It may have to start exiting various stimulus programs sooner than people expect.Although one hopes for the best,the outlook for Wall Street in 2010 is getting a bit cloudy.