As we conclude 2008, I see a very interesting and more dramatic environment developing in 2009. The main theme of 2009 will revolve around the actions of Congress and other government bodies around the world, as the current credit and financial crises reach deep into economies around the world.

This will continue to leave markets (stocks, bonds, currency and commodities) with a tremendous amount of uncertainty, leading to more market volatility -- especially in currency markets -- as politicians are unpredictable. This will make trading this market treacherous on both the upside and downside.

The single biggest theme I see for the globe in 2009:

As economic pressures continue to mount, will protectionism reign supreme in the halls of Congress and other governments around the world ? This can -- and likely will -- come in many forms, such as competitive devaluations of currencies (via official interventions). As it stands now, I would be long protectionism and short globalization going into 2009. If I'm correct, equity markets are likely to see further downside as a result of this type of behavior because protectionism isn't priced into the market yet.

Other major themes for 2009 will include:

1. A soverign debt crisis (read: selloff) starting with emerging countries (i.e. Ecuador) and spreading to the developed world.

2. How will the banks and Fannie Mae (FNM) and Freddie Mac (FRE) handle the duration issue involved in refinancing and mortgage modifications (From adjustable-rate to 30-year fixed) in the mortgage market? Will the Federal Reserve borrow short and lend long in an attempt to keep the long rates in check?

In the past, Fannie and Freddie had to run hedging programs to ensure duration matching of assets (mortgages) and liabilities (GSE debt). I think the Fed will assume this risk and gamble.

3. Banking reform and regulation gets passed in Congress, but what will it look like and will it be bullish or bearish for equities? This could put the market under pressure because Congress is likely to overdo it.

4. This one is a longshot, but I think we may see a debate about entitlement reform. This is a large elephant sitting in the room on the liability side of government's around the world.

In conclusion, I see 2009 as a tough and volatile year. Gun to the head, I'd say that S&P 500 will move down in the first half of the year to 600 before we see a decent rise in the second half of the year. That rise will be the result of some of the market uncertainty being lifted, even as economic statistics continue to look bad the entire year.

My favorite currency for 2009 is the Canadian dollar. Gold will continue to outperform all paper currencies. The comeback kid could very well be the British pound, especially against the euro.