Stock Market Forecast July, 2015 through January, 2016: Average

The first half of 2015 saw the U.S. stock market bounce around, but end up just about where it was at the start of the year.  Performance had been very close to our models' projections until this past week when concerns over the Greek debt crisis caused markets world wide to stumble.

Our models predict that the second half should start to get better toward the end of the year, but still fall a bit below normal performance.  As far as the model is concerned, it is anticipating normal summer weakness in the course of a maturing -- and slow growing -- bull market. Not much reason to either sell or buy.

U.S. Stock Market Forecast (Value Line Arithmetic Index):
Probable stock market gain 7/1/2015 to 1/1/2015: 4% (Avg. 6 mo. gain since 1984: 4.8%)
Probability of at least breaking even : ~ 70%   (Average for all months since 1984: 73%

(Click on image to enlarge.)

Looking at the graph above, for the past several months our models have predicted weakening market results.  The market in real time appears to be flagging faster than expected.  For the 6-month period just completed, our forecast have been for roughly a 5% gain.  As of last week the market had logged a 4% gain.  But, thanks to fears brought on by Greek sovereign default, the actual  six month result was no gain or loss.  Looking at prior years on the chart, when the market falls faster than predicted it also tends to stay weaker then anticipated for several months.  Because of the uncertainty of pending debt default in Greece and Puerto Rico, it wouldn't be surprising to see more market weakness in the next few weeks. A steep enough tumble might open up a buying opportunity.

Update on the Next Stock Market Crash

I have updated the page that follows a few slow moving indicators that are likely to point to the next stock market crash that will eventually come. Here is a quick summary.

The long term stock market indicators are less favorable than at the start of the year, but don't point to a stock market collapse in the near future. According to them, the next market disaster still could be a couple of years away.

• Margin Debt High? Margin borrowing is rising, but levels are still below the historical trend..
• GDP vs Potential GDP? The economy remains relatively weak, a good sign
• Sharply higher interest rates? Rates are still near historic lows.
• U.S. Leading Index Crashing?  Weaker.  The drop in the index has not been enough to point to recession, but it is enough to worry about.
• Market Reverting to the Mean? The overall market is near its long term trend making major near term gains unlikely. However, a crash reverting to or below the mean is still unlikely.
• Merger & Acquisition Activity Peaking?  Worth a worry or two.  M&A activity is climbing rapidly, pointing to a developing bubble. The question is just when it will eventually pop. There is no reason to expect it will be right away.