My macroeconomic models predict strong gains for the U.S. stock market for the first half of 2015 -- not fantastic, but decidedly better than average. (Based on the Value Line Arithmetic Average)
Forecast:
Probable stock market gain 12/1/2014 to 6/1/2015: 8% (Avg. 6 months since 1984: 4.8%)
Probability of at least breaking even : 80% (Average for all months since 1984: 73%)
As the models assess the situation, the underlying factors that have propelled the U.S. stock market upward since 2009 remain in place. The economy is still under-performing, but is improving. Interest rates remain incredibly low. Composite macroeconomic leading indicators are OK, but not great. Chances of a near-term recession are generally assessed as very low. While stocks are not at bargain-prices, the odds favor continued gains. With all the normal bumps, potholes and surprises along the way.
(Click on image to enlarge.)
Based on the most recently completed 6 month period (May through November, 2014) the stock market has been beating the expectations of the model somewhat. The model had predicted flat performance, but the strong rally from October has netted a 5% gain. Hopefully, this better-than-expected performance will continue into the new year.
