Probable stock market gain 11/1/2014 to 4/1/2015: 9% (Avg. 6 months since 1984: 4.8%)
Probability of at least breaking even : 85% (Average for all months since 1984: 73%)
The macroeconomic models are nicely positive for the coming 6 months with a decidedly better-than-average expected gain of about 9% and an 85% probability of at least breaking even over the period. (Based on the ValueLine Arithmetic Index, a 1700+ index of most of the U.S. largest corporations equally weighted.)
Despite the end of the Fed's Quantitative Easing program, borrowing costs are still incredibly low. Though the economy has shown a strong 3.5% growth rate over the third quarter, there is still considerable room for economic growth -- GDP is still significantly below normal and underemployment remains a serious problem.
(Click on image to enlarge.)
Checking back, the six month market forecast made last April was right on target -- basically flat performance. The forecast had been for zero growth for the ValueLine Arithmetic Index. Through October the Index was a few percent below the forecast. However, thanks to a sharp recovery over the past couple of weeks, the Index closed the forecasting period with a gain of 2%. For the past year the stock market has performed nearly as the model had expected, giving a mild assurance that the stock market is behaving normally.
