The beginning of the year is the time investment soothsayers like me tell people like you what is going to happen in the New Year. So after consulting my crystal ball, here's what I see for 2002:

• The dreaded "I" word makes a comeback.

Major underpinnings of the stock market rally over the last three months have been extremely low interest rates. And certainly, at the short end of the bond maturity spectrum, rates continue to be very low. How low? Just ask anyone who depends on income from their savings account, and they'll tell you rates are very, very, VERY low. Yet, an interesting thing is happening at the long end of the maturity spectrum. Rates are rising, and rising rather aggressively. Indeed, since early November, yields on 10-year Treasury bonds have risen approximately one percentage point. When the spread between short-term and long-term rates widens, it generally indicates a fear of rising inflation. Now most people don't expect to see inflation rise. Still, keep in mind the Federal Reserve Board, with its many rate cuts in 2001, has certainly laid the groundwork for inflationary pressures. Bottom line: Although it seems hard to believe right now given the soft economy and low short-term interest rates, don't be surprised if the "I" word rears its ugly head sometime in the second half of 2002.

• The last shall be first.

An interesting anomaly I've observed in the market over the last several years is that the worst-performing Dow Industrial stock in one year generally is one of the better-performing Dow stocks the following year. When attempting to explain this trend, the main reason I usually come back to is "mean reversion." In other words, stock prices in any given year can move to extremes. But over time, stock prices tend to revert toward their long-run averages. Thus, a stock that performs especially poorly in one year may be a stock experiencing selling extremes. As more normal trading develops in the following year, the stock tends to rise in order to return to its traditional trading range. The year 2001 was no exception, as AT&T, a dog in 2000, rose 40%. That compares to a decline of 7% for the Dow Jones Industrial Average in 2001. So what dog in 2001 could shine in 2002? The worst-performing Dow stock in 2001 was Boeing, declining 41%. Obviously, Boeing, a leading aerospace concern, saw its airplane business dive following the September 11 terrorist attacks and the subsequent slowdown in air travel. However, the firm's military business should see a bounce. Interestingly, Boeing was the worst-performing stock in 1998, falling 33%. In 1999, however, the stock rebounded nicely, climbing 27%.

• A flat market.

As much as I would love to tell you that 2002 will be a gangbuster year for stocks, my belief is that the market will be relatively flat this year. Why? First, I'm not sold on this economic recovery everyone says is just around the corner. I think any recovery will be extremely uneven. Second, even if the economy recovers as quickly as most people believe, I still see problems on the corporate earnings front. And since stock prices ultimately follow corporate earnings, I'm skeptical that stocks will bounce sharply this year. Thus, I wouldn't be surprised to see the Dow advance only 2% or so in 2002. Still, keep in mind that just because the market may be flat doesn't mean you shouldn't keep investing. Indeed, smart investors don't invest for 12-month time frames; they invest for 20-year time frames. You need to keep accumulating stock, especially during flat markets, in order to create real wealth in the market. Besides . . . I could be wrong, and the market could skyrocket in 2002.

Here's hoping I'm wrong.

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