Investors' Wish List

What, in a perfect world, would investors like to see under the tree?

1. A promise that stocks will move higher in January. The Stock Trader’s Almanac argues for the importance of its January Barometer:

…the most crucial indicator will be the full-month January Barometer, which states as the S&P 500 goes in January, so goes the year. Devised in 1972 by Yale Hirsch, this gauge has provided an accuracy ratio of 91.4%. It will be especially indicative with the market reacting to the agendas and priorities being set by the new Obama administration and a new Congress convening in addition to regular slew of economic data releases, earnings announcements and market forecasts.

The barometer was correct in 2008, when stocks tumbled almost 8% in January, then dropped more than 40% the whole year.

2. An end to crazy volatility.

Since the start of the financial crisis — and particularly since the collapse of Lehman Brothers — we’ve gotten used to wild swings in the stock market. These moves occur not just from day to day, but from hour to hour, often apparently in reaction to no news at all.

It’s all a sign of investors’ confusion about where the market (and the economy and financial system) are headed. Volatility also has scared away investors who might otherwise have jumped into this market. Why buy now if later this afternoon stocks might be down another 3%?

3. More confidence for executives and analysts about where earnings are headed. Lately, corporate executives have sounded as confused as everyone else about the state of the economy and their own businesses. Analysts are predicting S&P 500 earnings fall 8.5% in the first quarter of 2009, but analysts have been rapidly adjusting their estimates all year. Few investors take them seriously anymore. If investors could have more confidence analysts’ and executives’ predictions are right, they could consider buying stocks based on their fundamentals. But with the future so fuzzy, it’s hard to be sure that stocks are indeed priced cheaply.

4. Unemployment that stays near 7%. It seems likely that the jobless rate is going up (from 6.7% in November), as demonstrated by news that initial jobless claims rose 30,000 to 586,000 for the week ending Dec. 20. More job cuts may be planned for the New Year as well. However, the unemployment rate can’t jump too high or consumer spending will plunge and prospects for a 2009 economic recovery become bleak.

5. An end to scandals, collapses and other confidence-shaking events. The Bernard Madoff debacle is the latest of the big financial headlines to shock investors this year. It started with the collapse of Bear Stearns, continued with the demise of Lehman Brothers, the trouble at AIG and the Bush Administration’s request for a $750 billion bailout.

All these big headlines have rattled investors. It’s important to the stock market’s psychological health that conditions quiet down for a bit.

But if the bad news won’t stop, perhaps investors would settle for a more aggressive Securities and Exchange Commission. An aggressive federal regulator could help assure people their money is safe from the unscrupulous investment managers.

If you put together an investing wish list, what would be on it?

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