According to my forecasting models, the remainder of 2014 and the start of 2015 promise above average returns for the U.S. stock market as measured by the broad-based Value Line Arithmetic Index. But first, there remains a strong probability of some mild weakness in the next couple of months.
Probable market gain from 9/1/2014 to 3/1/2015: 7% (Average 6 months since 1984: 4.8%)
Probability of at least breaking even : 74% to 80% (Average for all months since 1984: 73%).
(Click on image to enlarge.)
So far this year the stock market has performed slightly higher than the models had forecasted. For the most recent completed 6 month period (March through August) the models had expected no gains, but the market rose 3%.
There is always a possibility that the market could move sharply lower, at this stage most likely caused by world events. That said, the models remain positive primarily because the economy still has not fully recovered from the Great Recession. When the economy has everyone smiling, these forecasting models will turn negative. In the meantime, most likely for the next couple of years, the models are likely to forecast continuing modest gains for the U.S. stock market.
