Hopes For 2009

What are Fools hoping for in 2009?

At this time of year, you often hear lots of so-called financial experts spouting predictions about the year ahead.

And guess what? 99% of the time, they're wrong.

For example, at the beginning of 2008, many property experts - such as the Council of Mortgage Lenders and Halifax - were predicting that house prices would either increase or stay flat. In fact, they fell by at least 10% on average across the nation, with some areas suffering even bigger falls.

Similarly, the massive 3.5% fall we have seen in interest rates over the past year took most `experts' completely by surprise. Here at The Fool, we witnessed weeks of chaos as banks scrambled to re-price their mortgages and savings ranges in line with the new base rate.

That's why, for 2009, we're not terribly interested in predictions by experts that turn out to be wrong anyway.

After all, there's only one accurate statement any of us can make, with 100% certainty, about 2009 - and that's not what will happen, but what we hope will happen.

So we decided to find out you - our readers - are hoping for next year. Are you hoping house prices will rise or fall? Do you want the stock market to recover? Are you wishing and praying that interest rates will increase, or are you more worried about the threat of deflation?

House prices

According to our survey, 52% of you want house prices to continue to decrease in 2009, while 48% of you want them to stop falling.

So it seems Fools are pretty evenly split. And this makes sense. Even if you're a homeowner, you can benefit from falling prices by upsizing. Sure, you might take a 10% hit on the price of your home - but so will the seller of your new home. And while that 10% hit might cost you, say, £20,000 on your £200,000 home, it will save you £30,000 on the £300,000 property you've moving into. So overall, you're £10,000 better off.

Of course, if you're looking to downsize, the opposite applies.

These points seem to be borne out by our results. We found that the younger you are, the more likely you are to want house prices to continue falling - while most older Fools would prefer to see a recovery in the housing market in 2009.

The stock market

An overwhelming majority (74%) of Fools want the stock market to recover in 2009, while just 26% want it to fall further.

This is particularly surprising when you filter by age: almost two-thirds (62%) of young people aged 33 or under want the stock market to bounce back in 2009, instead of hoping for further falls.

Yet these people can make long-term investments when shares look cheap, for example by investing in their pension, and reap the benefits in many years to come.

While I can understand why many people nearing retirement will be hoping the stock market will recover soon, if you can afford to buy some shares and hold on to them for five to ten years, a falling stock market in 2009 might still prove to be a good outcome for you.

That's provided, of course, the stock market does eventually start to recover.

Interest rates

When it comes to interest rates, I was surprised to find that two of every five Fools still feel interest rates are too high, and hope rates will fall in 2009.

This is despite the fact that the Bank of England's base rate is currently just 2% - the lowest it's been since 1951.

Why are Fools still so keen on falling interest rates? I suspect we can blame the lenders. Because while savers are suffering cuts in their rates, borrowers aren't benefiting from equivalent drops in their mortgage rates and other debt.

This would explain why far more young people want interest rate cuts than older people, who are more likely to be savers.

Inflation vs. deflation

Finally, we asked: are you more worried about inflation or deflation?

Deflation, answered 57% of Fools who took part in our survey. To me, this demonstrates just how pessimistic Fools are feeling about the state of the economy and the UK's ability to ride out this downturn in 2009.

Check out our video on The Dangers Of Deflation to find out what my Foolish friends David Kuo and Ed Bowsher have to say on this topic.

Happy New Year!

If you're feeling down in the dumps about your finances and/or the wider economy, as you can see from these results, you're not alone. And after a year of bad news, it's not really surprising.

But remember, falling markets present opportunities. So keep trying to look on the bright side - and whatever 2009 holds, The Fool wishes you a very Happy New Year!

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