Each year we release several predictions for the economy and markets over the following year. While obviously we can't guarantee that each will come to fruition, they characterize our beliefs at the time of publishing.

At the beginning of 2010 we made the following forecasts (a recap is italicized):

• The stock market would correct in first quarter. One-for-one. After extending its rally into January, stocks corrected roughly 6.5% into mid-February before resuming its rally through Spring.

• The overall economy will begin to see improvement, with manufacturing picking up by early summer. The economy did begin to see some improvement in 2010, with sales and revenues recovering substantially. Two-for-two.

• Real estate market currently (as of beginning 2010) at bottom for prices. Mortgage rates will move higher during year, though inventory will not drop as quickly as we would like because there are more foreclosures to come. Mostly right. Housing prices have mostly stabilized, though they have continued to fall in some areas. Mortgage rates crept up toward the end of the year, though inventory remains high thanks to additional foreclosures throughout 2010, though nothing like the waves seen in 2008.

• Inflation will be problem in future but not until economic recovery begins in earnest; maybe not until 2011. Dead on so far, but only time will tell.

• Employment, being a lagging indicator, probably won't begin recovery until after the economy as whole. Though corporate sales and revenues have picked up, companies have been hesitant to grow their payrolls. We expect this has been partially thanks to the added costs of labor due to Health Care Reform and other legislation.

• Oil prices will stay between $50 and $90 in 2010. Not quite. Though prices stayed within that range for the vast majority of the year, oil did experience a rally that led crude prices to creep over $90 at the end of 2010.

• Interest rates will begin to rise as economy recovers. Though rates ticked higher toward the end of the year, this has been not nearly as true as we expected - or hoped.

By all accounts, our forecasts had a pretty good turnout for 2010. Thankfully independent research can pay off. Now, without further adieu, our predictions for 2011:

• Economy will start to accelerate with vigor by mid-year. We were hopeful that 2010 would be a good recovery year for employment, but policies in Washington proved us wrong. We see employment improving in 2011 not as hopeful, but realistic.

• Employment picks up as the economy improves. We believe job growth will be due to economic growth, which we think will be spurred by a pro-business shift in government policymaking.

• Manufacturing industries will be the bright spot. To see growth and put people back to work, the US needs to get back to basics. The bubbles in tech, real estate, and financials didn't turn out too well for this country. It's time we realized there's no such thing as a "post-industrial" economy.

• Inflation will rise as economy improves. It's true that the Fed and Treasury have created a good deal of new money to inject liquidity since 2008. Thankfully, most of that money has set stagnant in the Federal Reserve System, serving only to prop up balance sheets of big banks. As the economy recovers, we think that money will start flowing around the US economy as banks begin lending, and that's when inflation will really become a concern.

• Interest rates will rise and bond prices will drop. After reaching 30+ year lows, we saw interest rates start to creep up at the beginning of 2010. Anyone who understands the relationship between bond yields and prices will know that as rates increase, prices decrease. Unfortunately, a large number of investors have flocked to bonds because of fear since 2008, and many will be slaughtered in the coming rise in rates.

• Stock market to continue its rise on real economic growth.

• Commodities were overbought and are due for a correction. This is particularly true of inflation hedges, which we've been saying for awhile. Some commodities tied to industry/manufacturing should do better (e.g. oil, base metals). However, commodities have run quite a ways in a relatively short period of time. We wouldn't be surprised to see a correction, or at least a pause in the rally.

These are our preliminary predictions for 2011. Obviously our outlook will change as circumstances continue to develop. However, we have ever intent of using these developments to make money for ourselves and our clients.