That's the overarching prediction I'm going with for the months ahead. And here are five more scenarios likely to unfold in areas that affect Americans' financial well-being:
- More consumers will live within their means, by necessity if not by choice.
With housing equity no longer available to bail people out, more individuals will need to scrimp, save and pay down bills.
It's already happening. The nation's savings rate has been rising. Also, credit bureau TransUnion recently noted that both mortgage and credit-card delinquencies peaked in the fourth quarter of 2009 and now are in a declining trend that the firm expects to persist through 2011. That improvement is showing up in both Arizona and the nation, although Arizonans have more catching up to do.
- The stock market in 2011 will go up for a third year in a row.
Whether it's a modest advance or a third straight year of double-digit gains is anyone's guess, but the trend should be favorable - although with more volatility than we've seen in recent months.
Stocks prices clearly aren't as cheap as they were a year or two ago, but the economic backdrop has improved.
Besides, where else are you going to put your money? Competing investments appear even less promising.
Money-market funds and bank certificates of deposit are yielding almost nothing, bonds could get clobbered if interest rates rise, and gold is at least as speculative as stocks, having quintupled in price over the past decade. Real estate still hasn't shaken off its multiyear slump and isn't as easy to get into or out of as before, curbing its investment appeal.
That leaves the stock market as the favorite, by default.
- Consumer legislation will take a breather.
The past year or two has been marked by spate of new laws that, on balance, are viewed as victories for consumers.
These include the financial reform bill that created the Consumer Financial Protection Bureau and credit-card legislation that restrains certain fees and deceptive practices. Other developments cited by the Consumer Federation of America include curbs on costly bank-overdraft fees, clearer rules governing debt-relief companies and more transparency in the mortgage-lending process.
But the new laws that came at a time of political backlash against banks, with Democrats firmly in control of the White House and Congress. That's been replaced by power sharing, if not gridlock, in Washington, along with a sense among many that the federal government has overreached in too many areas.
- Interest rates will push a bit higher while inflation stays tame.
We've probably seen the low point in this cycle on rates tied to mortgages, credit cards and other types of loans. With the economy plodding along, but in an upward direction, interest rates should continue creeping higher. And that's not necessarily a bad thing, as any retiree depending on CD income will tell you.
The bond market is overdue for a major default, and that could push up interest rates if borrowers demand higher returns to offset greater risks.
Time will tell if inflation accelerates, as is widely expected, but I don't see anything dramatic.
Strong deflationary forces are still at work: Real-estate prices remain depressed, global competition is intense, factories aren't close to being fully utilized and one in 10 workers can't find a job.
- Bankruptcies will drop but remain at elevated levels.
Consumers are under stress, to be sure, but fewer people likely will throw up their hands and seek creditor protection this year.
In large part, that's because many of the most distressed individuals already have succumbed. Bankruptcy attorneys and debt counselors still report being as busy as ever, but 2010 could go down as the high-water mark.
Arizona and the Valley already have set a single-year record for filings in 2010, and the December numbers haven't even been counted.
However, the monthly filing figures have been in a downward trend since peaking in March, so 2011 filings should be lower. The national bankruptcy trend has improved even more noticeably.
by Russ Wiles The Arizona Republic Jan. 2, 2011 12:00 AM
6 financial bets for the new year
Stocks prices clearly aren't as cheap as they were a year or two ago, but the economic backdrop has improved.
Besides, where else are you going to put your money? Competing investments appear even less promising.
Money-market funds and bank certificates of deposit are yielding almost nothing, bonds could get clobbered if interest rates rise, and gold is at least as speculative as stocks, having quintupled in price over the past decade. Real estate still hasn't shaken off its multiyear slump and isn't as easy to get into or out of as before, curbing its investment appeal.
That leaves the stock market as the favorite, by default.
- Consumer legislation will take a breather.
The past year or two has been marked by spate of new laws that, on balance, are viewed as victories for consumers.
These include the financial reform bill that created the Consumer Financial Protection Bureau and credit-card legislation that restrains certain fees and deceptive practices. Other developments cited by the Consumer Federation of America include curbs on costly bank-overdraft fees, clearer rules governing debt-relief companies and more transparency in the mortgage-lending process.
But the new laws that came at a time of political backlash against banks, with Democrats firmly in control of the White House and Congress. That's been replaced by power sharing, if not gridlock, in Washington, along with a sense among many that the federal government has overreached in too many areas.
- Interest rates will push a bit higher while inflation stays tame.
We've probably seen the low point in this cycle on rates tied to mortgages, credit cards and other types of loans. With the economy plodding along, but in an upward direction, interest rates should continue creeping higher. And that's not necessarily a bad thing, as any retiree depending on CD income will tell you.
The bond market is overdue for a major default, and that could push up interest rates if borrowers demand higher returns to offset greater risks.
Time will tell if inflation accelerates, as is widely expected, but I don't see anything dramatic.
Strong deflationary forces are still at work: Real-estate prices remain depressed, global competition is intense, factories aren't close to being fully utilized and one in 10 workers can't find a job.
- Bankruptcies will drop but remain at elevated levels.
Consumers are under stress, to be sure, but fewer people likely will throw up their hands and seek creditor protection this year.
In large part, that's because many of the most distressed individuals already have succumbed. Bankruptcy attorneys and debt counselors still report being as busy as ever, but 2010 could go down as the high-water mark.
Arizona and the Valley already have set a single-year record for filings in 2010, and the December numbers haven't even been counted.
However, the monthly filing figures have been in a downward trend since peaking in March, so 2011 filings should be lower. The national bankruptcy trend has improved even more noticeably.
by Russ Wiles The Arizona Republic Jan. 2, 2011 12:00 AM
6 financial bets for the new year
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