By Eleazar David Meléndez: Subscribe to Eleazar's RSS feed
December 20, 2011 1:15 PM EST
With less than nine trading days left in the year, it's that time of the year again when market participants of all kinds and levels of expertise begin making long-term predictions for what's to come next year.
Friday, we looked at some of the more positive predictions that painted investor-friendly scenarios in 2012. At a time of daily stock-market seizures, weekly bank and sovereign debt downgrades and monthly central bank interventions, most people are seeing the glass half empty, and have forecasted bearish -- if not downright abysmal -- market conditions for next year.
Below, some of the more salient of those predictions:
1. U.S. Banks Will Experience "Contagion" of the Crisis in Europe
As the financial crisis in Europe has intensified in the past quarter, leading to a sharp correction in global equities, multiple head-of-state summits and coordinated central bank intervention, some experts have publicly worried the same issues being faced by European banks could affect their American counterparts. The idea is that, as a result of the opaque interconnectedness that binds the world's financial institutions, a "contagion" of the crisis could occur.
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"A failure in the euro-zone area, a malfunctioning of the euro, would have negative repercussions for the U.S. not just in terms of a slowdown in U.S. exports to Europe, but also because of linkage between American financial institutions and European institutions," Henry Kaufman, a noted Wall Street economist, was quoted by Reuters on a Sunday interview, summarizing the case for contagion.
"We don't know the full depth of these links," he added.
Individual economists are not the only ones expressing the dreary forecast. A poll of chartered financial analysts worldwide conducted by the institute that assigns that certification, and released Thursday, shows about half think contagion is likely, according to the Dow Jones Newswires.
Bank economists are talking about it, too. TD Bank Chief Economist Craig Alexander, for example, recently explained how one particular item might put the contagion phenomenon in relief.
"If Greece were to default tomorrow, it could prove a massive shock to the global financial system if it is not handled in an orderly way" Alexander said in a statement.
Emerging markets had already seen "contagion" effects as a result of both investor's increased risk-awareness and the volatility of capital, which affects the shallower emerging capital markets more severely.
But is the crisis coming to America?
2. Europe Will Devolve Into War
As morbid and depressing as it might seem to suggest armed conflict as part of a market forecast, strategists for various major banks have not been shy about playing out scenarios of political violence that, they believe, could develop in the near future.
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