Stock Market Rally In New Year

The stock market will rally on the first trading day of the new year on the heels of a year that saw the deepest declines in the market since 1931. Markets were heading up overnight in Asia and bode well for a strong opening on Wall Street when trading commences in the morning.

Will we see a rally through January or will markets move downward testing the lows seen in 2008? Will investor angst lessen enough for money to begin to move off the sidelines and into the market? Which sectors will be hot in 2009 and which will fall out of favor? These are questions which will be answered as we move through a year that  many economists have already concluded will be a dismal one for the economy.

Unemployment will become center stage as the focus on both the financial and automobile sector bail outs lessen. Government intercession in the economy will come in the form of additional stimulus provided by a democratically controlled Congress and a supportive President anxious to flex their electoral mandate.  A solution to stem the tide of depreciating home values will top the wish list of many investors.

Many investors are leery of the market following the 2008 crash and it remains to be seen what the impact of the Bernie Madoff fraud will be on the investing public. They may need to see some tangible appreciation in the markets before they are willing to commit to a market that suffered through its worst performing year since 1931. However, a stabilization of home valuations, a return to reasonable credit markets and continued low energy costs could fuel a banner year for Wall Street.