Citigroup’s chief U.S. equity strategist Tobias Levkovich provided clients with eight key concerns, eight unasked questions and eight plausible and interesting outcomes to consider for 2008.
Key concerns:
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- Stagflation
- Global recession
- Presidential elections in the U.S.
- Energy costs
- Counterparty risks in the financial sector
- Plunging greenback
- Sharp declines for home prices
- Apparent ineffectiveness of the U.S. Federal Reserve’s action
Key questions:
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- Everyone may agree that real estate prices in the U.S. are trending downward, but where is the value? Where should buyers be looking?
- If oil is near US$100 per barrel, why are energy companies not earning more?
- With at least 95% of equity mutual fund flows going international in recent years, why aren’t more people worried about this craze?
- Why do hedge funds continue to attract money despite mediocre returns?
- What ever happened to avian flu and will other global fears just fade away?
Key plausible outcomes:
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- The Republicans could hold on to the White House and give the American people what they want – a divided government.
- Oil prices could fall to the US$70-US$75 per barrel range on slower global growth
- The U.S. dollar could hit $1.25 versus the Euro when the ECB finally cuts rates
- The financials are the top performer in the S&P 500
- China’s equity bubble bursts
- Hedge fund consolidation rises.
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