BULLETIN: Strategy

The 2010 Outlooks

09-S-271

December 22, 2009
US Market & Economic Targets

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It is that time of year again when Wall Street publishes their outlooks for next year. Nine major firms did not disappoint, collectively publishing over 3,500 pages of 2010 predictions. While other outlooks will certainly be released after this point, some consensus has emerged for 2010.
S&P 500 Index Target

1,400

1,350

DB
1,300

• Strategists, on average, see the S&P 500 gaining 9.5% to 1,222 and earning $76 per share in 2010 • Despite the view that the S&P 500 will gain over 9%, the consensus is to "underweight" or "benchmark" US equities • Oil will rally slightly to $80 • Gold will rally to $1,213 • The Dollar vs the Euro will end 2010 at 1.45 • The US economy is expected to grow 3.1% • The FRB will not hike interest rates until at least mid-2010 On pages two through four we summarize the macro outlooks. Page five covers the view towards the US, six and seven the world abroad, while key commodities are reviewed on page eight. Kevin Pleines 203-341-0833

JPM BAC GS MS C BCS CS
Size = GDP Growth Estimate
$66 $68 $70 $72 $74 $76 $78 $80 $82 $84

1,250

UBS

1,200

1,150

1,100

1,050 $64

S&P 500 EPS Estimate

S&P 500 Target EPS BoA / Merrill Lynch Barclays Citigroup Credit Suisse Deutsche Bank Goldman Sachs JPMorgan Morgan Stanley UBS Average 1,275 1,120 1,150 1,125 1,325 1,250 1,300 1,200 1,250 1,222 $73 $66 $73 $76 $81 $76 $80 $77 $80 $76

GDP % Growth 3.2% 3.5% 2.2% 2.7% 4.9% 2.1% 3.5% 2.9% 2.6% 3.1%

Birinyi Associates, Inc.

© Copyright 2009, Birinyi Associates, Inc. The information herein was obtained from sources which Birinyi Associates, Inc. believes reliable, but we do not guarantee its accuracy. Neither the information, nor any opinion expressed, constitutes a solicitation of the purchase or sale or any securities or commodities.

BULLETIN: Strategy
Macro View
Bank of America/ Merrill Lynch
10 Themes for 2010: 1. Government balance sheet risk 2. Rising taxation 3. Alternative yield strategies 4. Financial sector rehabilitation 5. Corporate cash flow beneficiaries 6. Rising global growth 7. Emerging market consumers 8. Commodity price inflation 9. Return of active management 10. Alternative energy Top Three Investment Ideas: 1. Asia & Emerging-Market consumer (large-cap EM financial and consumer related stocks & US and Japanese multinationals) 2. Tightening plays as markets tighten by raising the price of commodities, the yield of gov't bonds, value of EM currencies: long global banks (including Japan) and large cap energy stocks 3. Hedge tail risks such as bubbles in China and gold, a double-dip, trade protectionism or a US dollar crisis by buying puts on volatility using options on China H-shares and S&P 500 financials

09-S-271

December 22, 2009

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Goldman Sachs
Investment Recommendations: Best Ideas for 2010 1. Buy US companies that generate a high percentage of sales from BRICS 2. Invest in companies with high operating leverage that currently run at the bottom of their margin cycles 3. Buy cyclical sectors now defensives later 4. Buy stocks high Sharpe ratio 5. Looking ahead to 2H: free cash flow and dividend growth

UBS
Key Themes for 2010: 1. Investment style: re-rating limited, earnings and yield are key 2. Equity regions: Emerging Markets are well positioned 3. Bonds: not the place to be 4. REITs: Bottoming Asset Value Cycle 5. Commodities: More moderate returns

Morgan Stanley
10 Trades for 2010: 1. Overweight equities vs credit vs government bonds 2. Overweight Large Cap Growth 3. Overweight non-ferrous vs ferrous commodity equities / Overweight agri chemicals 4. Overweight global tobacco - Japan, US & Europe 5. Overweight Japanese industrials & exporters 6. Buy Euro pharma over US pharma 7. Overweight Consumer Non-Cyclicals vs Cyclicals (Staples over Discretionary) 8. Overweight US large cap vs small caps 9. Overweight global autos/auto components 10. Underweight financials - (European & UK)

Birinyi Associates, Inc.

© Copyright 2009, Birinyi Associates, Inc. The information herein was obtained from sources which Birinyi Associates, Inc. believes reliable, but we do not guarantee its accuracy. Neither the information, nor any opinion expressed, constitutes a solicitation of the purchase or sale or any securities or commodities.

BULLETIN: Strategy
Macro View
Deutsche Bank
Seven Trades for 2010:

09-S-271

December 22, 2009

Page 3/2 Page 3/8

Richard Bernstein Capital Management
10 Predictions for 2010: 1. Stock and bond market returns in the US will again be positive 2. The US dollar is likely to meaningfully appreciate once market-driven short term rates begin to rise 3. US dollar "carry trades" could get killed as 2010 progresses and the US dollar appreciates 4. The Fed will spend the second half of the year trying to catch up to, and flatten, the yield curve 5. Corporate profits are likely to explode to the upside during 2010 6. Employment in the US will probably continue to improve 7. Treasuries will probaly underperform stocks 8. Small cap value, I think, will be the best performing size/style segment 9. Financial regulation will progress, but the bull market will probably aid politicians' "forgetfulness" 10. I think Democrats will do better in the 2010 midterm elections than people currently think they will

JPMorgan
Across JPM Research our Top 10 Trade Recommendations for 2010: 1. long EM equities 2. short USD versus EMFX 3. short USD versus EUR and JPY

1. Signficant recovery upside but also downside risks: best of both worlds high-quality cheap stocks on normalized earnings 2. M&A up cycle beginning: buy aquisition targets 3. Rising rates: long brokers and short REITs 4. Stronger US dollar: long retailers and short energy 5. Overweight US versus Emerging Markets: long US financials and short EM financials 6. Flows follow: stay with value over growth 7. Uncertainty to decline: short S&P 500 12m forward volatility

4. short US agencies and MBS outright 5. long US HY outright 6. overweight US HG and EM external debt versus UST 7. long EM corporate credit 8. overweight cyclicals within equities 9. long lower-tier II bank bonds outright and versus government debt 10. long AAA CMBS/RMBS and A-rated CLOs

Birinyi Associates, Inc.

© Copyright 2009, Birinyi Associates, Inc. The information herein was obtained from sources which Birinyi Associates, Inc. believes reliable, but we do not guarantee its accuracy. Neither the information, nor any opinion expressed, constitutes a solicitation of the purchase or sale or any securities or commodities.

BULLETIN: Strategy
Macro View
Credit Suisse
Estimates 12% (S&P 1,220) rally in global stocks by mid-2010, but expects a renewed bear-market to emerge in late 2010 Overall, we have a bar-bell strategy - with a focus on corporate spending plays and minerals and mining on the other side, cheap indirect emerging market exposure via the consumer staples on the other We like quality high growth, high dividend yield, positive earnings revisions and big cap. We avoid high financial leverage

09-S-271

December 22, 2009

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Bank of America/ Merrill Lynch
“Underweight” US vs global regions Long European equities, Asia, and emerging markets, Short US and Japanese equities Developed markets are in a cyclical bull market and Emerging-Markets are in a structural bull market A major correction at some stage in 2010 is inevitable No "double-dip" expected

Barclays
Expected path for equities next year is a sharp rally in Q1 followed by sideways corrective behavior in Q2 and Q3 investors grapple with policy shifts Predicts S&P 500 will fall to 990 in 1H 2010 then rebound to end the year Immediate term, biased to stay long equities, shifting into more defensive areas as quarter progresses Expects the first Fed funds rate hike in Sept-10

Morgan Stanley
US equities will probably will reach a peak early in 2010, before hitting a trough in the second or third quarter Earnings growth will have to be sales driven Neutral stance on North America & "underweight," on Europe and the UK Macro: backdrop: Triple "C" Equity Expectation - Cautions, Convergence, Capricious

Goldman Sachs
Stock rally to continue in a low rate world Buy cyclicals now, own defensives later in the year S&P 500 to rally to 1,300 in 1H then fall to 1,250 by year-end Forecast Fed target rate unchanged until 2012

JPMorgan
Strong first half in 2010 followed by policy risks in the second half Investors are too pessimistic about US profit outlook Favor pro-cyclical groups - but higher quality Favor high beta Best performance for stocks in 1H10, with perhaps little gain after Fed rates probably on hold until 1H11

Citigroup
Fairly solid recovery is likely in 2010-11 Global equities are moving out of the twilight zone and into recovery phase Favor EM, CEEMEA as a cheap contrarian play, prefer LatAm to Asia & US remains "underweight" Favor a balance between earning momentum (which favors cyclicals) and valuation (which favors defensives) US equities may spike abouve year-end target of 1,100 during earlier parts in the year and back off

Deutsche Bank
Our fundamental thesis remains that after a corporate over-contraction, a necessary expansion to meet existing demand has created, and will maintain pressures for, a cyclical recovery in 2010

Birinyi Associates, Inc.

© Copyright 2009, Birinyi Associates, Inc. The information herein was obtained from sources which Birinyi Associates, Inc. believes reliable, but we do not guarantee its accuracy. Neither the information, nor any opinion expressed, constitutes a solicitation of the purchase or sale or any securities or commodities.

BULLETIN: Strategy
2010 Outlook: US Summary

09-S-271

December 22, 2009
S&P 500 EPS in 2010
$90

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S&P 500 Year-End Target & EPS
S&P 500 2010 Price Target
1,400 1,300
$80

1,200 1,100 1,000 900
$50 $70

$60

800 700 600 BAC BCS MS HSBC RBC Average JPM CS DB GS C UBS
$40

$30 Average GS BAC BCS MS RBC UBS CS DB C JPM

1,222 US Sector Weightings
Goldman Sachs Morgan Stanley Deutsche Bank Merrill Lynch JP Morgan

$76 GDP Growth Next Year
Average - 3.1%

Citigroup

Barclays

Consumer Disc Consumer Stap Energy Financials Health Care Industrials Materials Technology Telecomm Utilities

+ + + + -

= = + + + = = -

+ = + = + + -

= + = = + + -

+ + + = + + + = -

= + + + = = =

+ = + = + = = -

UBS

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

+ + = = = + =

First Fed Rate Hike
MS & UBS BCS C BAC JPM GS

Jan-10

Apr-10

Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11
© Copyright 2009, Birinyi Associates, Inc. The information herein was obtained from sources which Birinyi Associates, Inc. believes reliable, but we do not guarantee its accuracy. Neither the information, nor any opinion expressed, constitutes a solicitation of the purchase or sale or any securities or commodities.

Birinyi Associates, Inc.

BULLETIN: Strategy
2010: Looking Abroad - GDP
GDP Growth Heat Map

09-S-271

December 22, 2009
2010 GDP Growth Estimates (%)
Goldman Sachs Morgan Stanley Deutsche Bank Credit Suisse BNP Paribas Merrill Lynch JP Morgan Citigroup Barclays

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Asia & Pacific Australia China India Indonesia Japan Malaysia New Zealand Philippines Singapore South Korea Taiwan Thailand

2.8 9.6 8.2 6.0 1.7 5.0 4.3 6.5 5.0 6.0

3.7 9.6 6.2 5.2 1.5 5.0 4.3 5.5 5.4 5.8 4.5

3.3 9.8 7.8 1.5

10.5 7.9 5.7 5.5

2.1 7.8

2.5 6.5 4.7 3.3

3.3 11.9 7.8 5.2 1.4 4.2 2.7 4.2 5.8 3.7 4.0 4.2

9.5

6.3

5.3 3.6 4.4

2.9 9.5 7.5 5.3 2.2 5.0 2.8 5.0 6.5 4.7 5.8 6.1 2.5 2.5 2.7 3.6 1.0 1.5 3.2 5.0 1.6 3.0 5.0 2.4 3.5

2.9 10.1 10.0 7.6 6.6 4.8 3.5 0.8

1.8 9.0 9.0 6.0 1.8 6.0 2.0 5.0 7.0 4.6 4.4 6.0 1.5 2.4 2.3 2.1 -0.1 1.7 2.4 5.5 -0.2 1.8 2.7 2.4 2.9 2.6

2.8 9.8 7.6 5.5 1.8 5.3 2.5 4.6 6.2 4.5 4.8 5.2 1.6 1.8 1.7 2.1 0.4 1.2 2.8 4.0 -0.2 1.8 2.8 4.1 2.6 2.9

= < -5% Growth = < 0% Growth = > 0% Growth = > 5% Growth = No Coverage

Europe & Eastern Europe Czech Rep. 1.9 1.3 Europe/Euro 1.5 1.3 France 1.4 1.5 Germany 2.4 1.6 Hungary 0.3 0.4 Italy 1.2 0.8 Poland 3.0 2.2 Russia 4.3 3.8 Spain -0.5 0.0 U.K 1.5 2.0 Middle East & Africa South Africa 2.4 Turkey 3.8 3.5 North America Canada 3.4 US 3.5 2.1 2.2

1.5 1.5 1.8 2.0 0.5 1.4 2.6 3.0 0.1 1.5 2.6 4.2 2.5 2.7

1.8 2.2

2.6 1.2

1.5 1.8 2.5 1.3 4.5 -0.3 1.9 2.6 5.5 2.5 1.7

0.8

1.8

3.0

1.1 2.2 1.9 1.2 0.2 1.8 3.5 5.0 0.1 1.2 3.2 4.5

0.5 0.5 1.0 0.7 2.5 -0.9 1.5 2.8

2.8 3.3

2.1 2.1

2.9

3.2

2.5 2.9

S. America/Latin America Argentina 3.5 3.2 Brazil 5.3 4.1 Chile 4.6 5.5 Colombia 3.4 2.4 Mexico 5.1 4.0 Peru 3.9 Venezuela 2.4 -2.0

2.0 5.0 3.5 2.5 3.6 5.0 -1.7

2.0 4.0 3.0 2.0 2.3

4.0 5.8

4.2 2.6

3.9 6.2 5.0 3.0 3.5 5.4 2.5

2.2 5.3 3.8 3.0 2.1 4.1 0.6

1.0 4.8 3.8 4.1 2.4 4.9 0.0

2.9 4.5 4.0 3.8 2.5 4.5 -2.1

2.7 5.0 4.2 3.0 3.3 4.6 0.3

Birinyi Associates, Inc.

© Copyright 2009, Birinyi Associates, Inc. The information herein was obtained from sources which Birinyi Associates, Inc. believes reliable, but we do not guarantee its accuracy. Neither the information, nor any opinion expressed, constitutes a solicitation of the purchase or sale or any securities or commodities.

Average

HSBC

UBS

BULLETIN: Strategy

09-S-271

December 22, 2009
Goldman Sachs Morgan Stanley Deutsche Bank Credit Suisse BNP Paribas Merrill Lynch JP Morgan Citigroup

Page 7/2 Page 7/8

Looking Abroad: Equity Market Weightings
Leading/Lagging Equity Markets
Top "Overweights" Brazil China India Taiwan Indonesia Top "Underweights" Australia Malaysia Israel Malaysia Peru
Asia & Pacific Asia ex. Japan Australia China India Indonesia Japan Malaysia Philippines Singapore South Korea Taiwan Thailand

HSBC

+ = + + = + = + + + + = + + + + + + + = + + + + = = + + + = = + + -

+ + + = + + + -

+ + = + = = + = +

+ +

+ + + = +

+

+

-

US Recommended Weight vs Global Markets

= = + + + + + -

Emerging Markets Emerging Mkts

+ +

+ +

Morgan Stanley

Deutsche Bank

Credit Suisse

Merrill Lynch

Citigroup

UBS

Europe & Eastern Europe Europe + + Czech Rep. Hungary Poland + Russia + = United Kingdom Middle East & Africa Egypt Israel Pakistan + South Africa Turkey = S. America/Latin America Argentina + + Brazil + Chile Colombia = Mexico = Peru

UBS = = + + + =
+ = Overweight Underweight Equal Weight

= + + + +

= = = +

+ +

=

US vs Int'l Markets

-

-

+

-

=

=

= + = + = + -

+ = = = = -

+

+

+ = + -

+ -

=

-

Birinyi Associates, Inc.

© Copyright 2009, Birinyi Associates, Inc. The information herein was obtained from sources which Birinyi Associates, Inc. believes reliable, but we do not guarantee its accuracy. Neither the information, nor any opinion expressed, constitutes a solicitation of the purchase or sale or any securities or commodities.

BULLETIN: Strategy
Commodities
2010 Forecasts
Euro vs USD BoA / Merrill Lynch Barclays Citigroup Credit Suisse Deutsche Bank Goldman Sachs JPMorgan Morgan Stanley UBS Average 1.28 1.45 1.59 1.54 1.40 1.35 1.50 1.50 $1.45 Copper ($/metric ton) 7,125 6,563 7,500 5,732 7,100 $6,804 Gold ($/oz) 1,500 1,088 1,200 1,150 1,288 1,050 $1,213

09-S-271
$100 $95 $90 $85 $80 $75 $70 $65 $60 GS

December 22, 2009
End-2010 Gold Forecast
$1,600

Page 8/2 Page 8/8

End-2010 Oil Forecast
Crude Oil ($/barrel) 85 85 84 70 65 95 78 85 75 $80

End-2010 EUR/USD
$1.65 $1.60

C CS UBS JPM BCS Average Current DB GS

$1,500
BCS MS C BAC/ML Average JPM UBS Current CS DB

BAC/ML $1,400

$1.55 $1.50 $1.45

$1,300

JPM $1.40 Average C DB

$1,200

$1.35 $1.30

$1,100
$55 $50

BCS Current UBS

BAC/ML $1.25 $1.20

$1,000

Birinyi Associates, Inc.

© Copyright 2009, Birinyi Associates, Inc. The information herein was obtained from sources which Birinyi Associates, Inc. believes reliable, but we do not guarantee its accuracy. Neither the information, nor any opinion expressed, constitutes a solicitation of the purchase or sale or any securities or commodities.

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