Sources of economic forecasts - in rating order

1. UN - World Economic Situation and Prospects 

The report cautions that despite these more encouraging headline figures, the recovery is uneven and conditions for sustained growth remain fragile. Credit conditions are still tight in major developed economies, where many major financial institutions need to continue the process of deleveraging and cleansing their balance-sheets. The rebound in domestic demand remains tentative at best in many economies and is far from self-sustaining. Much of the rebound in the real economy is due to the strong fiscal stimulus provided by Governments in a large number of developed and developing countries and to the restocking of inventories by industries worldwide. Consumption and investment demand remain weak, however, as unemployment and underemployment rates continue to rise and output gaps remain wide in most countries. In the outlook, the global economic recovery is expected to remain sluggish, employment prospects will remain bleak and inflation will stay low. 

2.Financial Times outlook
Should investors switch out of bonds into equities?
Yes. Picking assets, at least at the start of the year, will be about choosing the least worst option. Equities have risen a lot since their 2009 trough. Bonds have also enjoyed an impressive ride, although theirs arguably started earlier, in the 1980s. US Treasury yields have fallen from 16 per cent to 3 per cent over that period. But assuming – and it could be a big assumption – that western economies continue to recover, equities should do better than bonds, where yields could rise sharply. Investors looking for yield may plump for dividend-rich stocks. A worsened eurozone debt crisis could knock the stuffing out of equities. In 2011, markets could also wake up to the fact that authorities are potentially just storing up problems for 2012 and beyond. 


3.
Nouriel Roubini, New York University Professor of Economics and co-founder and chairman of Roubini Global Economics, addresses a luncheon during the Asian Financial Forum in Hong Kong
Roubini Global Economics (RGE) has predicted that global economy's growth next year will be marginally weaker than this year, with eurozone holding the biggest risk to global growth, and that the U.S. will not emerge any time soon from the worst unemployment crisis it has faced in decades.
RGE's global outlook for 2011 says a large part of the advanced world will continue to struggle with balance-sheet repair and debt crises, while plans to manage monetary exit strategies and fiscal sustainability remain uncertain at best. The report also says growth in the emerging world will also slip from the above-potential rates record this year and that tensions between the U.S and China will continue to be in focus.
Following are some details of RGE's 2011 outlook for individual economies:
UNITED STATES
Nouriel Roubini, who predicted the global financial meltdown of 2008, has revised down the outlook for the U.S. gross domestic product growth from a previously forecasted 2.8 percent this year to 2.7 percent, adding that the pace of growth will be insufficient to spur job growth.
"GDP growth in 2011 will most likely support a pace of job creation that will be barely capable of absorbing increases in the labor force and will fail to bring down the unemployment rate significantly." Roubini says unemployment will remain high at around 9.5 percent.
The report predicts the disturbing possibility that it will take at least a decade to bring down unemployment rate to five percent, even if the U.S. economy grows at a rate of 4 percent a year.
Also, inflation will remain below expectations, the report says. "Inflation will remain well below the implicit 2% Fed target for core PCE for quite some time. This implies no change in Fed policy; i.e., completion of the large-scale asset-purchase program and perhaps more quantitative easing."
However, the report predicts that the possibility of the country slipping back into recession is much lower now than before. "The tail risk of a double dip now is much lower than before: around 15-20%."
EUROZONE
The report says economic growth in most of the major economies in the eurozone, including Germany, France and Italy, will slow down in 2011 and countries will have to follow stimulative fiscal policies.
"Next year will see major fiscal, structural and institutional adjustment in the eurozone (EZ) that could set the stage for future integration and cohesion if the political will can be mustered; or risk disorderly financial pressures in the EZ—and possibly a break-up—if these reforms are not implemented."

4. Thomson Reuters and Freeman Consulting Services
Global M&A activity is at its highest level since late 2009, providing a glimmer of hope for investors struggling to decipher stock and bond markets.
Global takeovers announced in the first three quarters of the year reached $2.03 trillion, an increase of 22% compared with the $1.67 trillion in deals announced in the same period last year, according to a report from data-tracking firm Dealogic.
Investors' hopes often soar when M&A activity picks up because acquisitions are often a sign that companies are confident the economy will grow and business will improve. Investors' hopes are also buoyed because few things cause the price of a company's stock to rise faster than an unsolicited takeover offer.
Consider that the all-time record for merger deals in a single year — $4.3 trillion, according to Dealogic — came in 2007. That's the same year the Dow Jones Industrial Average hit its all-time high.
The feverish pace continued in 2008, until deal volume fell off a cliff after the economy collapsed, and stocks plunged. November 2008 marked the lowest level of M&A activity since 1995, when Dealogic started tracking deal volume.
But thanks to low prices for takeover target companies, historically high cash balances and easier credit terms, the atmosphere for deals in 2011 is as positive as it's been since the credit crisis sent the economy, and M&A activity, into a tailspin.

Global M&A Set for Surge in 2011
Global M&A activity is expected to increase 36% next year to $3.04 trillion, driven by a big pick-up in deals in the real estate and financial services industries, according to a report released by Thomson Reuters and Freeman Consulting Services.
The survey of over 150 worldwide corporate decision makers showed that instead of bargain-hunting for cheap equity deals, next year's buyers are expected to focus on expanding their core businesses to increase market share, Jeff Nassof, an associate consultant with Freeman told Daily Finance.
"We did the same survey last year and the target [company's] valuations were a factor," Nassof says. "But in this year's survey, people aren't just looking for distressed companies and value deals. They're looking at M&A as part of their competitive strategy."
The real estate market is expected to see a whopping 88% increase in M&A activity, with the financial industry finally recovering to post an anticipated 75% increase, the survey also showed.
While real estate M&A is expected to post a dramatic increase next year, Nassof pointed out that the sector is coming off of a relatively small base. Just $2.23 trillion in M&A deals were done last year.
"The overall 2010 levels are still pretty depressed. It's still nothing like the heydays in 2007," Nassof said. "In real estate, confidence in the economy was the top cited factor. Real estate managers are feeling better about the risk and growth out there."
While M&A in the financial industry is normally market-share driven, next year's activity will be marked by efforts to comply with government regulatory changes that call for big investment banks and institutions to wall themselves off from riskier investments, Nassof said. Last spring's financial reform legislation is forcing some big banks to shed riskier assets including hedge funds and certain derivatives.
Another industry expected to see an increase in M&A is health care, where the survey projects a 16% increase next year, largely due to consolidation as a side effect of healthcare legislation.
As usual, technology companies also are expected to be on the prowl. Executives expect valuations of buyouts will remain "reasonable," even though a recent bidding war between Dell Inc. (Nasdaq: DELL) and Hewlett-Packard Co. (NYSE: HPQ) for 3Par Inc. (Nasdaq: PAR) resulted in a premium of 244%.
Doing Deals in Emerging Markets
Emerging markets are expected to lead the M&A surge in 2011, just as they did in 2010.
Fully 47% of the executives polled said emerging Asian markets are ripe for M&A deals in 2011, with 43% targeting markets in the Americas. By comparison, only 30% are looking at Western Europe and only 18% find Eastern Europe and Russia attractive.
During the first three quarters of 2010, emerging markets accounted for 27.4% of worldwide M&A volume compared to 21% during the comparable period in 2009.
M&A activity in deals across international borders surged during the first nine months of 2010, totaling $723 billion and accounting for 41.2% of overall M&A volume, compared to 26.1% last year.
And Asian companies have the necessary cash to get deals done. According to a report from Moody's Corp. (NYSE: MCO), the total cash reserves of Asian companies touched $231.6 billion in mid-2010. Corporations in the Asian region (excluding Australia and Japan) have seen their aggregate cash balance – including cash, cash equivalents, deposits and short-term investments – grow by almost 60% since the end of 2008.
However, the Moody's report did not take into consideration the reserves of financial companies, in which case the total cash reserves figure would have been much higher.
U.S. companies had cumulative cash holdings of about $1 trillion, over four times more than their Asian counterparts, but the average cash balance of Asian companies was almost double that of US companies, the report noted.

5.
Nobel Prize-winning economists including Paul Krugman,  Myron Scholes and Joseph Stiglitz predicted the credit squeeze will inflict more pain on global growth and Goldman Sachs Group Inc. projected half of the world economy faces recession.
``There will be a global recession,'' Scholes said in an interview today at a conference in Lindau, Germany, featuring 14 Nobel laureates in economics. Stiglitz forecast the world economy would continue to perform below its potential for some time, resulting in a ``social loss'' through weaker employment.
A year since the U.S. housing slump sparked about $500 billion in credit-market losses for banks globally, the world's largest economies are all stumbling as rising borrowing costs combine with record commodity prices to sap growth.
The U.S., Japan, the 15-nation euro area and the U.K. are ``either in recession or face significant recession risks in the months ahead,'' Goldman's London-based international economist Binit Patel said in a report to clients today, noting such nations account for half of the world economy.
The ``worst is yet to come,'' said Hong Kong billionaire Li Ka-shing in Hong Kong today. The credit squeeze is turning Li ``very conservative about acquisitions,'' he said.
Bank Collapses
Lone Star Funds, the Dallas-based private equity firm, today agreed to buy IKB Deutsche Industriebank AG after the German bank was felled by the subprime mortgage crisis. Bear Stearns Cos., the fifth-largest U.S. securities firm, has already collapsed, while the bonds of regional banks such as National City Corp. and Keycorp are under pressure on expectations of more fallout.
``The financial sector needs to shrink,'' said Kenneth Rogoff, former chief economist at the International Monetary Fund, in an interview in Singapore yesterday. ``I don't think simply having a couple of medium-sized banks and a couple of small banks going under is going to do the job.''
Rogoff also said ```the worst is yet to come in the U.S.''
 

6.

David Chapman director of Bullion Management
If the markets are to rally strongly into at least mid-2011, the fuel supplied by rapid monetary growth, QE2 and continued low interest rates will be key. Precedents abound, particularly the periods 1998 to 2000 and 2005 to 2007. Both were characterized by high monetary growth and consistently low interest rates. That long-term rates are now rising is insufficient at this time to derail a potential runaway stock market move. The funds are primarily coming from the financial institutions (banks, investment dealers, hedge funds). However, a rapid stock market rise will at some point become dangerous as blowoffs are always followed by steep rapid declines.
If there is a big negative on the horizon in 2011 it is that the US debt limits will be hit sometime into the late first or early second quarter. Given that the new Republican congress and Republican senators have promised to fight any increase in the debt limit this could give rise to a complete shutdown of government. This confrontation will be a game of brinkmanship but it could also prove to be disastrous for the US stock market. This is an event to watch carefully in 2011.
There is a huge disconnect between the broader economy and the economy dominated by the powerful corporations and financial institutions and those who run them. Much has been said about how the rich are becoming richer while the middle class disappears, to be replaced by a large and permanent underclass. The Gini coefficient, a measure of distribution of wealth and income, has for the USA risen since 1980 from the mid to high 30s to the mid-40s. This puts the US on a par with numerous third world countries. It is the highest coefficient for the US since 1929, just before the Great Depression.
A rising stock market is not necessarily a sign of a healthy economy, if it is being fuelled by monetary policies intended to bring about a rising stock market. And a rising stock market usually benefits only a small percentage of the population. Most of the population remain in low-paying jobs or unemployed and with little hope following the great housing crash of 2007.
While the markets saw slightly higher highs in 2007, the thought remains that the economy and stock market remain in a "secular" bear market. These long-term bear markets can go on for a period of 16 to 20 years - witness the secular bear markets of 1929-49 and 1966-82. But as everyone knows, powerful rallies can take place within a bear market. Between 1966 and 1982, the market revisited the highs of 1966 a number of times before once again plunging.

There is also the long-term Kondratieff cycle of recession/depressions. This is a much shorter 50-60 years and is last considered to have bottomed in 1949. The idealized Kondratieff Wave cycle is shown below. It corresponds with depressions that occurred in the late 18th century, the depression of 1836-42, the Long Depression of 1873-96 and the Great Depression of 1930-42. The Kondratieff long wave is generally not accepted by traditional economists but there is some evidence that it does exist. Significantly, a period of 50-60 years from 1949 encompasses the past decade, which culminated in the financial panic of 2008 and stock market low of 2009. But given the possible influence of the longer 72-year and 90-year cycles, this particular Kondratieff Wave may not yet have seen its nadir. At the end of the other long waves the culmination of debt build-up was largely cleansed via bankruptcy and defaults. Today this process is still being worked out.

7. Justin Modray, founder of website CandidMoney.com, says that investors considering an investment in emerging markets should remember that they tend to follow a pattern. “They grow off the back of exports within one or two dominant sectors, and then benefit from growing domestic demand as populations become wealthier, which invariably boosts the financial services and telecommunications sectors,” he says.
“The key for future success is therefore the outlook for key exports and the potential for continued domestic growth, although investors should bear in mind political issues, corruption and general growing pains often crop up.”


8. John F. Mauldin, President Millennium Wave Investments  
Muddle Through Economy as around 2% growth. That is enough to keep things going forward, but not enough to substantially dig into unemployment or raise incomes. The entire last decade was a Muddle Through decade, with growth averaging 1.9%. 

 9. Bob Pavey, a partner at IT and life sciences investor Morgenthaler:

“2011 will be a surprisingly good year. The recent tax ‘compromise’ and the excellent performance of IPOs in 2010 (particularly IPOs of foreign technology companies) means that we will have a much better IPO climate in 2011. And this means that limited partners will be happier and will start investing in venture capital more aggressively again – particularly in international firms.”

10. Lawrence Roulston, Resource Opportunities/GreenTech Opportunities

There is a wide range of opinions on the outlook for metals, reflecting the uncertainty in nearly all of the variables that impact metal prices.

The sovereign debt and worries and fears of a double dip recession still cloud the outlook for some investors.  Another round of quantitative easing will inject another $600 billion into the global money supply.  The announcement of QE2 built confidence that the American economy will remain in positive territory.  It also re-ignited inflation concerns, pushing gold to a further record high.

Investors were already buying gold for its safe-haven status.  The gold market enjoyed a further boost as investors seek cover from looming inflation (read “currency devaluation”).