Probable stock market gain 3/1/2015 to 9/1/2015: 3.5% (Avg. 6 mo. gain since 1984: 4.8%)
Probability of at least breaking even : 73% (Average for all months since 1984: 73%
Coming off a strong 5% gain during February, the prospects for further stock market gains over the next half year are subdued: positive, but below average price gain of 3% to 4% and average probability (73%) of at least breaking even. Looking at the progress graph below, the model would expect gains to continue for a few months followed by a bit of weakness during the summer months as is typically the case.
(Click on image to enlarge.)
The model has been anticipating the stock market pretty closely for the past year or so. In the last completed 6 month period the model had predicted a gain of roughly approximately 6% and the actual gain turned out to be about 4%. Close enough.
The overall U.S. stock market situation has stayed roughly the same for a couple of years:
- U.S. stocks generally are somewhat over-priced.
- Historically low interest rates, however, prop up these high stock prices.
- Further real economic growth is necessary before stocks can rise much.
- Room for growth remains as the economy is still performing below its long term potential.
- Based on the amount of outstanding margin debt and continuing economic recovery a price bubble does not appear to exist.
- In the near term international economic disruptions do not seem likely to severely damage the U.S. economy. (e.g. Greek debt questions, low oil prices possibly unbalancing several countries)
Taking all of this into account, a major stock market decline does not appear to be likely for at least a year or so.
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