In the past three years I have published a forecast for the market for the entire year and this year I am putting myself on the line again for no benefit to myself other than to draw out what I foresee and to get your reactions.
There is no way to disprove my forecast, so I will only be judged after the fact and even then it is just a best guess based on currently known factors, which are in themselves difficult to know what is discounted by the market and what the market is looking for down the road.
If you look at my past projections, you might want to take note and check back in from time to time to see how this is panning out.
Based on the continuity of the advance with each quarterly range moving steadily ahead from the previous quarter, I think it is fair to say this has been a fairly powerful bull market fueled by modest revenue gains and massive corporate buybacks and Federal Reserve injections.
If you remove the leveraging from the Fed, Corporations and Margin Account Buying, I feel confident that the market would be significantly lower. But, given that the overall market has had two massive bear market declines in the past 15 years, I think a more logical bear market is one that moves sideways to down over time instead of violently down at one time.
I can see violent declines to shake out weak-longs (margin buyers) and then I can see more violent rallies to bring those buyers back into the market only to reverse and shake them back out again. I think this is going to be a market-makers market. Selling rallies and buying declines is going to be a profitable strategy this year. 5% declines can be bought and 5% rallies can be sold and sold short.
I am looking for the year end to finish at the lows.
(NOTE: I can create another forecast for the DIA/DJIA as I have done since 2011 - See "Links to Related Charts")
Major bullish factors:
1. Fallen oil prices a major benefit to grease the economic engine and fuel consumer spending.
2. Corporations sitting on massive piles of retained earnings (but they are buying back stock and boosting dividends, but not reinvesting in their businesses).
3. Corporate profit margins are at rich levels.
4. The Federal Reserve is still keeping money cheap to borrow, hoping to stoke the economy.
5. Stocks are cheap relative to bonds because interest rates are so low. Inflation is low because of the internet and massive competition.
Major Bearish Factors:
1. Rising Dollar is a sign that foreign investors are flooding in at high prices, hurting our economic competitiveness.
2. Margin Buying is keeping the stock market afloat and could be unwound at any time for any reason.
3. The Government raised tax rates on stock gains once, and look to raise them again. In the past, rising capital gains rates is bearish.
4. Interest rates are the key lever to stock prices, if rates go up the stock market will go down.
5. The global economy is weak and China is steadily getting into a weak position. Demographics suggest weak spending for many years as boomers retire and cut back spending.
I suggest investing in stocks individually and avoiding the "overall market indexes". Know what you own and don't diversify. Understand what impacts each of your investments and don't count on a rising tide to lift your portfolio. It will take individual corporate success to drive growth in your portfolio. The era of "free market returns" is behind us, especially with interest rates at give away levels, which is hurting our retirees and savers. And lastly, as the Presidential Campaigns get into full swing by year end, the rhetoric and fear mongering will keep a chill on the overall market. As a strong-minded candidate takes the lead in the polls, the markets can then navigate the cross-currents that are in place now.
Happy Investing in 2015.
Tim
12:28AM, Monday, February 9, 2015
There is no way to disprove my forecast, so I will only be judged after the fact and even then it is just a best guess based on currently known factors, which are in themselves difficult to know what is discounted by the market and what the market is looking for down the road.
If you look at my past projections, you might want to take note and check back in from time to time to see how this is panning out.
Based on the continuity of the advance with each quarterly range moving steadily ahead from the previous quarter, I think it is fair to say this has been a fairly powerful bull market fueled by modest revenue gains and massive corporate buybacks and Federal Reserve injections.
If you remove the leveraging from the Fed, Corporations and Margin Account Buying, I feel confident that the market would be significantly lower. But, given that the overall market has had two massive bear market declines in the past 15 years, I think a more logical bear market is one that moves sideways to down over time instead of violently down at one time.
I can see violent declines to shake out weak-longs (margin buyers) and then I can see more violent rallies to bring those buyers back into the market only to reverse and shake them back out again. I think this is going to be a market-makers market. Selling rallies and buying declines is going to be a profitable strategy this year. 5% declines can be bought and 5% rallies can be sold and sold short.
I am looking for the year end to finish at the lows.
(NOTE: I can create another forecast for the DIA/DJIA as I have done since 2011 - See "Links to Related Charts")
Major bullish factors:
1. Fallen oil prices a major benefit to grease the economic engine and fuel consumer spending.
2. Corporations sitting on massive piles of retained earnings (but they are buying back stock and boosting dividends, but not reinvesting in their businesses).
3. Corporate profit margins are at rich levels.
4. The Federal Reserve is still keeping money cheap to borrow, hoping to stoke the economy.
5. Stocks are cheap relative to bonds because interest rates are so low. Inflation is low because of the internet and massive competition.
Major Bearish Factors:
1. Rising Dollar is a sign that foreign investors are flooding in at high prices, hurting our economic competitiveness.
2. Margin Buying is keeping the stock market afloat and could be unwound at any time for any reason.
3. The Government raised tax rates on stock gains once, and look to raise them again. In the past, rising capital gains rates is bearish.
4. Interest rates are the key lever to stock prices, if rates go up the stock market will go down.
5. The global economy is weak and China is steadily getting into a weak position. Demographics suggest weak spending for many years as boomers retire and cut back spending.
I suggest investing in stocks individually and avoiding the "overall market indexes". Know what you own and don't diversify. Understand what impacts each of your investments and don't count on a rising tide to lift your portfolio. It will take individual corporate success to drive growth in your portfolio. The era of "free market returns" is behind us, especially with interest rates at give away levels, which is hurting our retirees and savers. And lastly, as the Presidential Campaigns get into full swing by year end, the rhetoric and fear mongering will keep a chill on the overall market. As a strong-minded candidate takes the lead in the polls, the markets can then navigate the cross-currents that are in place now.
Happy Investing in 2015.
Tim
12:28AM, Monday, February 9, 2015
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