This is the last article of 2010 so I figured I would throw my hat in the ring and make a few predictions. Any predictions should be used for entertainment and also guidelines as to broader themes rather than specific events that will happen or not. It helps to focus on macro themes in order to understand what could affect the investment landscape during the next 12 months. Without further ado, here are my predictions for 2011:
1. Volatility will be much higher in 2011 than most people are anticipating. Investors have gotten spoiled over the past three months as the market has melted up with amazing consistency and calm. The fear of losing money was almost non-existent, and the market doesn’t like to make things this easy for too long. Look for the VIX to hit 40 during the year and average in the upper 20′s to lower 30′s, which is above average.
2. Look for at least two 10% corrections during the year and up to four 5% corrections (including the 10% ones). Of course this would explain why the VIX will be elevated according to my first prediction.
3. Small caps as judged by the Russell 2000 will have a sub-par year and close 2011 around the flat-line, give or take a few percent. This is where the complacency has been the most pronounced and large caps will trounce them in the new year.
4. The Federal Reserve will not embark on any more Quantitative Easing programs after outrage from Republicans snuffs “QE3″ out before it ever gets started.
5. The solar sector will be one of the better performers as demand exceeds expectations and Germany spends more on solar than most analysts expect. Just as a note, JA Solar (JASO) is my favorite stock in the sector.
6. The stars of 2010 like Netflix (NFLX), F5 (FFIV), and Priceline.com (PCLN) fall back to Earth and underperform the major averages as the hot money leaves them for greener pastures.
7. Commodities will start the year out strong but have a vicious correction as the dollar rallies and there are doubts about the longevity of the economic recovery.
So there you have it. This is my attempt at a little reading of the tea leaves which should be taken with a big grain of salt, but as I said is a fun exercise. Have a happy and safe new year!
Peering into the 2011 Crystal Ball is an article from: 
