NEW YORK -- In the spirit of the holiday season, here's a 2012 investor wish list, based on "The Twelve Days of Christmas," compiled by Larry Adam, chief investment strategist at Deutsche Bank Private Wealth Management.
Adam, in his weekly strategy report released today, says all the wishes on his list have a "healthy probability" of occurring in the new year.
His holiday cheer coincides with another positive day in the stock market, with the Dow Jones industrial average up more than 100 points on growing hopes that Europe will finally adopt a plan to fix its debt woes at a summit later this week.
First Day: One "grand compromise" between the Republicans and Democrats to put the U.S. economy "on the path to fiscal prudence." Such a deal, he hopes, will include an extension of the payroll tax cut for 2012, which would put more cash in workers' pockets on pay days.
Second Day: Two more "doves" at the Federal Reserve to join chairman Ben Bernanke and other Fed members to assure that any additional economic softness will be met with "aggressive" non-traditional monetary policy, similar to the Fed's earlier bond-buying programs, known as quantitative easing.
Third Day: The European "troika," which includes the European Union, European Central Bank and the International Monetary Fund, "devising a comprehensive plan" to resolve the eurozone's debt crisis and restore confidence in the future of the euro currency.
Fourth Day: Four straight quarters of positive economic growth, or GDP, to maintain the growth momentum in the world's largest economy.
Fifth Day: Five golden rings. Adam said twelve golden rings would have been better, given that gold is selling a tad below $1,750 an ounce, but he said he didn't want to be too greedy. It would also be "golden" if the yield on Italy's 10-year government bond traded below 5%, as that would signal the healing of the eurozone's debt crisis. On Monday, the yield on Italy's 10-year bond fell sharply to 5.99% from 6.64%. The drop occurred after Italy approved an austerity plan late Sunday to improve its finances and reduce its debt load.
Sixth Day: China slashing its interest rates to below 6% to ensure its economy can continue to post strong growth and avoid a "hard landing;" they're trading at roughly 6.6% now. A soft landing in China would buoy economic growth and support riskier assets like stocks.
Seventh Day: A 7% price return for the benchmark Standard & Poor's 500 stock index. Add in two percentage points of dividend return and that equates to a total return of 9% in 2012 — which is "not too bad," says Adam.
Eighth Day: An 8% unemployment rate by the end of 2012, down from 8.6% in November. Putting more Americans back to work would be bullish.
Ninth Day: High-yield bond yields, known as junk bonds, staying below 9%, which would support robust returns for the fixed-income sector.
Tenth Day: All 10 of the S&P 500's sectors ending 2012 in the black, a sign that asset prices of all types are heading in the right direction — up.
Eleventh Day: With S&P 500 earnings growth expected to slow to single digits next year, a double-digit expansion (i.e. 11%) of price-to-earnings ratios will give stock prices a lift.
Twelfth Day: Another twelve consecutive months of monthly gains in retail sales. "Shop till you drop America," says Adam.