Most probably the U.S. stock market will end 2015 just about where it is now, or a shade worse. The odds of at least breaking even in the market are middling, a little below average. The stock market has performed near the predictions of my 6 month forecasting models for the last couple of years -- meaning that no major unexpected forces appear to be moving prices. Therefore, the model predictions for the next six months are probably credible.
U.S. Stock Market Forecast (Value Line Arithmetic Index):
Probable stock market gain 5/1/2015 to 11/1/2015: 0% (Avg. 6 mo. gain since 1984: 4.8%)
Probability of at least breaking even : ~ 60% (Average for all months since 1984: 73%
Normal seasonality has a role in the weak forecast, but the gradual weakening of the bull market that has run since early 2009 is the dominant market factor now. The graph below from StockCharts.com compares the relative performance of the S&P 500 (IVV) to 7-10 year Treasury Bonds (IEF) since the start of 2013. The story is simple: stocks have performed much better than bonds, but stocks seem to be running out of steam.
(Click on image to enlarge)
Link to chart
As shown in the chart below, our market forecasts have been weakening over several months.
For the most recent 6 month period, the market gained about 9 % while our model expected roughly 7% gains. Close enough.
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