U.S. Market Forecast (based on the Value Line Arithmetic Index):
Probable stock market gain 2/1/2015 to 8/1/2015: 7% (Avg. 6 months gain since 1984: 4.8%)
Probability of at least breaking even : 80% (Average for all months since 1984: 73%)
The U.S. stock market has tapped nearly all of the quick gains that came with recovery from the Great Recession. From here on the gains are likely to be about average and depend on solid gains in the real economy. With the scale of probable gains getting smaller the relative importance of market volatility grows. Translation: Look for a very bumpy ride with fairly low pay-off.
Keeping track of how well these models are performing, over the past 6 months the market (using the Value Line Arithmetic Index) gained 3.5% while the prediction had been for roughly a 7% gain. I'll call that a win: the model expected relatively modest market gains and that is what occurred. The models used here are not expected to be highly accurate. Their sole purpose is to give early notice of major market gains or losses, hopefully several months in advance. Time will tell if the models can do that.
