Year four and as always this list is in no particular order

1.       Total U.S. consumer consumption will continue to contract in 2010 as consumers pay off negative savings from the past and begin building a savings buffer.  The consumer deleveraging trend will continue.

2.       The dollar rebound will last through most of the first quarter, but will hit new lows by year's end.

3.       Small Cap Growth will be the top performing asset class in the US.  Look for outsized returns in this sector, they get to make up for 2009's underperformance and put in 2010's natural premium.  If the normal premium is 3-5 percent, look for 6-10 percent of excess performance.

4.       By year's end the number one topic will be inflation.  TIP and WIP will be top fixed income asset classes.  This means interest rates will be going up - dramatically.  Rates to double!  10-year US Treasury at 3.50% will be 7.00%. 

5.       Total Global demand will increase even with the US consumer deleveraging.  US may stop losing jobs, but it will not be creating new ones.  Productivity will make up US's portion of increase global sales.  Exporters will have the best year.  XLK, XLI and MOO will be the sweet spot in U.S. Large Cap equity market.

6.       Local governments will struggle with declining revenues as the US consumer market contracts.  Just like people, local governments are spending all their savings before cutting staff and services.  When the savings run out - dramatic cuts will be the only option.  If you own Muni's, do your due diligence.  Once the downgrades begin you will not find the exit fast enough.

7.       Emerging market equities (EEM) will be the top overall major asset class.  I am thinking between 25-40 percent by year's end and will have two really great trades during the year.  If you own it now, a sell and a buy.  If you don't own it now, a short and a cover and buy long.

8.       IYR and XLU will be the most stable coupons earned 2010.

9.       US Equities at this point in time are fairly if not slightly over valued.  How they do will depend on how bad the dollar falls.  Equities will earn about three quarters of what the US dollar falls. 

10.   Congress will be put in a position it must make real decisions with immediate consequences regarding spending, borrowing and the realization of trillions of dollars of losses at the Fed and Treasury.  It will be their action that creates the double dip in the economy and the slope of the following recovery.   

I see a big V coming in the stock US Stock Market this year and all fingers will be pointing at the Administration, FED and Congress in this election year.  Congress will do what it should have done last year and not have spent all that money and let the Fed and Treasury leverage themselves up. 

2010 the year of Financial Reckoning!