December 31, 2008 7:32 PM

What big event in 2009 might rattle investor confidence further?

This post contains the answers to one of 10 questions sent out in our quarterly survey of investment professionals and economists.

8. What big event in 2009 might rattle investor confidence further?

Don Cassidy: A domestic terror incident, probably in a port, subway, or mall. Not an airplane. New presidents are tested. And GM/Chrysler will slide into Chapter 11, but without the huge effects their managers have been painting for Congress. Their life will go on.

John Goltermann: Anything terrorism-related or heightened geopolitical conflict, or another big distress/bailout situation of a "too big to fail" enterprise like GE.

Michael L. Serota: Other than a catastrophic event, natural disaster, terrorist activity, etc. I don't foresee anything in the financial markets going haywire.

Bill Greiner: You are asking for a "surprise" to occur - and asking what that "surprise" might be. By definition, this is a guess, as "surprises" are of course, "surprises". That being said, we are gaining the sense that the hidden issues for next year may indeed be political in nature, rather than economic in nature. Terrorist activity, trade barriers, the nationalization of certain businesses are all possible issues which would truly "rattle" the markets.

David A. Twibell: I can think of several including the collapse of another major financial institution, a rapid decline in the US dollar, or a major international political crisis. Having said that, I think the biggest threat to investor confidence - or what is left of it - would be continued deterioration in economic data that leads them to the conclusion the economic mess will extend well past the middle of next year.

Tucker Hart Adams: The surge in foreclosures accompanying the reset of a big number of Alt-A mortgages will hurt, as will the continued decline in the commercial real estate sector. When people realize Obama can't "fix it," that is likely to be a negative.

Gregory Anderson: Any event that the government will not support with some form of financial intervention will likely shake investor confidence. The government has already set a precedent that it will help avert any large collapses. But a mid-sized event - such as a media conglomerate or retail chain - might erode confidence. While such an event may be detrimental to the economy, perhaps it builds confidence that capitalism has returned.

Gary Horvath: Generally speaking, the public is very supportive of President-elect Obama and they believe he has the ideas and leadership skills to help us get past our economic woes. As long as the successful parts of his stimulus plans outnumber the failures, his fiscal policy won't derail public confidence. Most likely a scandal or some type of event that personally affects him would hinder confidence.

Fred Taylor: A major conflagration in the Middle East causing a closure of the Straights of Hormuz, a freeze in the credit markets again, or a collapse of Citibank, JP Morgan, or Bank of America would cause another shock to world markets.

Robert Sonora: Oil prices, further decline in housing, and any disaster. Things appear tenuous.
Andre Ratkai: Big events fall into the category of "unknown unknowns" that are impossible to predict or plan for. Investor confidence may be tested by 1) a major terrorist attack; 2) an assassination attempt on Obama; 3) a spike in the price of oil, maybe due to the latest conflict in the Gaza Strip; or 4) a sense that Obama's stimulus program has failed to arrest the economic decline.

Jeff M. Wilson: With the global economy and financial markets so fragile, numerous events which could have calamitous results. We will likely see one or more of the following which will trigger the next market collapse: failure of large businesses and financial institutions, acts of terror, war, a nuclear Iran, blockage of the Straits of Hormuz, and revelations of a massive investment fraud that affects average investors.

Rich Wobbekind: The investor experienced a number of big events in 2008 and is already rattled. In this scenario it wouldn't take something very large to create a large drop in confidence. One possibility is greater larger political turmoil/terrorism in other parts of a slowing global economy.

Maclyn Clouse: Obviously, we always have the threat of another 9 11 type terrorist event. It would a huge decline in the market. A complete bailout of the auto industry would rattle confidence because investors would now be fearful that bailouts will be given freely with no regard anymore to their merit. Nothing short of bankruptcy will fix the auto industry. Consumers and investors understand this. The only people who don't understand this are the auto industry executives, the UAW, and the auto workers.

Mark Lee Levine: This list could be very long and would include some of the items noted above, e.g., war, other conflicts, health crises, consumer confidence, positions by other countries, monetary and fiscal crises, energy and other pricing, supply and demand factors (oil, etc.), currency instability, corruption and its impact (Madoff, et al), natural disasters, financing limitations, capital market concerns, increased debt in the US Market, and much more."

Dr. James O'Toole, Daniels Distinguished Chair of Business Ethics, DU's Daniels College of Business: " In order to restore confidence--the sine qua non of economic recovery--the nation's political and business leaders need to stop talking about the current financial mess in terms of the Great Depression. This is not yet a depression, nor does it need to be great, and only thinking can make it so. History does not repeat itself. The causes of the current mess are different from those of the late 20s, and the responses will have to be different. That doesn't mean the problems aren't serious, or that they are easy to solve. It means that we won't solve them if we think in terms of fighting the last economic war. Fortunately, the government has new and better tools at its disposal, and there is also greater knowledge about how the economy works. In this regard, ideology is the enemy. There are no ideologically pure solutions to the current situation. We need pragmatism, not dogmatism."

Patty Silverstein: No way to predict!

David A. Peterson: Without going out on a limb, rising unemployment numbers are likely to be the biggest negative in 2009. I would caution investors not to become overly concerned with these numbers since this is how businesses cope with what has already happened in the economy and is not a precursor of what will happen. However, there comes a point in time where higher unemployment levels feed back into more economic woe, and investors need to be wary of this.

Warren Olsen: The destabilization and potential overthrow of a major government like Russia, India or China. Each of these countries are vulnerable because of slowing economies, but I believe Russia is most vulnerable. Russia's economy has been supported by excessively high prices for oil and other commodities, and Putin becomes vulnerable if the economy there gets really bad which it could.

Barbara Walchli: Problems in the banking sector usually lag the economy and are likely to remain visible in 2009.

Posted by David Milstead at 7:32 PM | Comments (16)