Financial Predictions for 2012

Sigh. A lot of people are predicting more of the same for 2012: Another year of stock market volatility, high unemployment, banking industry upheaval, weak housing and more talk about Facebook, mobile commerce, 401(k) plans and taxes.

But maybe that's just because it's hard to envision change. Not everything will stay the same. For example, a year from now, we'll not be having weekly Republican presidential debates, and we will most likely know who the President will be in 2013. Conventional wisdom holds that by this time next year, Facebook will be a publicly traded company and not just a huge time suck.

It's easier to imagine the European economic situation getting better or worse in 2012 than it is to imagine it lurching along as it has been for a whole other year. And federal financial regulators who have spent a year threatening to increase their oversight of mortgage lenders, financial advisers and 401(k) plans may stop talking and start doing.

What does all that mean for your wallet? Here are some financial predictions for 2012.

-- You may play with your money more. Banks and other financial companies don't have much in the way of interest rates to offer, so they're turning their services into games to win and keep customers. Like every other kind of company, they're investing more in social networking. So expect more game-like random rewards and Facebook-hyped deals from the financial industry, says Philip Blank of Javelin Strategy & Research.

For example, one new company called SaveUp runs a sweepstakes-type game for bank customers, who earn the right to "play" when they save money or pay down debt. The rewards vary from coffee pots and gift cards to a grand prize of $2 million.

You'll be courted, but you'll pay more for bank convenience. Bank of America may have backed away from its $5 per month debit card fee in the face of consumer wrath. But the big banks will have no choice but to charge for services that don't make money for them. At the same time they'll be fighting off competitive pressures from community banks and credit unions. Writes Mark Schwanhausser of Javelin, "2012 is shaping up as a year in which...(financial institutions)... fight to retain and steal customers - with a central focus on the tradeoffs of fees vs convenience."

Safety stocks may not be the safest. Recovery stocks may recover. Staid dividend-payers have already been bid up, and the consumer essentials, like toilet paper and toothpaste, may give way to recovery type companies, suggests Sam Stovall, chief equity strategist for Standard & Poor's. "We recommend overweighting the consumer discretionary sector on the lessening of recessionary pressures in the U.S. as well as above-market EPS growth prospects, and favorable technicals." S&P and MFS Investment Management (among others) are also recommending technology stocks for 2012.

You'll charge more, and debit less. Issuers will up their credit card rewards to pull users away from less profitable debit cards, says Ken Lin of CreditKarma, a credit scoring and comparison site. As consumers move out of full-recession mentality and shop more, they'll find themselves reaching for credit cards more, he says.

Housing may bottom. Real estate pros believe we have at least six more months of falling - or flat - home prices, but they are increasingly predicting that 2012 may be the year in which home prices stabilize. That's the word from HomeGain, Zillow, Credit Suisse and other market analysts. That doesn't mean there will be a new race to the top or a frothy sellers market anytime soon, just that the blood may be stanched.

You'll be studying your 401(k) more carefully. Beginning in May 2012, employers will have to show workers much more information about the fees they pay for their plans. Expect new investment alternatives and more focus on fees.

Cheaper investment advice will grow in availability and popularity. Just about everyone needs help figuring out how to invest for retirement, and there's a cadre of relatively new companies that has figured out they can do that with software. By focusing on balanced portfolios of stocks and bonds, index mutual funds, and ultra-low fees, they are aiming for mainstream middle-class investors. The latest savvy? Online advice firm Hedgeable is offering free financial advice. Flesh and blood advisers can be expected to respond with hourly fees and lower cost approaches.

Taxes will be somewhat predictable. Most of the individual income tax provisions run through 2012, and no students of Washington politics expects big tax legislation before the Presidential election. As for what you'll be paying and deducting in 2013? That's wide open and probably will be a year from now, too.

Prices may rise. Predicting inflation is always tricky, but investors are now buying Treasury inflation protected securities (TIPS) at negative yields. That's because they believe inflation will take off, boosting the adjustable rates on those bonds. Other bonds could suffer if prices and rates rise, of course. But most financial savants were predicting that last year too, and 2011 was a very good year for bond buyers. The take-away? The future is un-knowable. Diversify and wait. (The Personal Finance column appears weekly, and at additional times as warranted.; Editing by Gunna Dickson)