Market Forecast - Ken Taubes @ Pioneer Investment Management

Executive Summary

We believe the U.S. economy will grow by 3% to 4% in 2010.

While consumption may remain muted in light of continued deleveraging among consumers, exports, inventories and fixed investment could experience strong gains. Robust emerging market growth and the weakened dollar, together with high levels of corporate profits, productivity and cash (relative to this stage of the economic recovery) should help bolster GDP growth.

Inflation may threaten if appropriate monetary and fiscal measures are not implemented during the next several years, but should remain dormant in the near term, given the ongoing deleveraging.

Finally, we believe the U.S. dollar may remain stable over the next year. Its declining value relative to currencies of countries with strong growth, current account surpluses and solid fiscal budgets may be offset by its potential to appreciate against the euro and the yen, whose countries face lower growth than the U.S. and have comparable, if not higher, levels of government debt/GDP.

Following record returns in 2009, credit markets should cede market leadership in 2010 to equities, which we believe offer more attractive relative value and should benefit from the global recovery and high corporate operating profits. Over the next several years, however, we continue to find credit markets attractive when compared to developed market government debt, the quality of which will decline as deficits mount. In addition, as the economy recovers, we foresee a cyclical rise in yields, which will favor fixed income credit.

We also believe investors, where appropriate, should talk to their advisors about the advisability of making a discrete allocation to inflation-sensitive products to protect themselves against potential long term inflation.

Ken Taubes
(c) Pioneer Investment Management
http://www.pioneerinvestments.com/

Ken Taubes is the Head of Portfolio Management U.S. and is a Portfolio Manager of Pioneer Investments’ U.S. Core and U.S. Core Plus strategies. He has over 25 years of investment experience, including more than 10 with Pioneer Investments, and is well known within the investment industry.