Stock Market Forecast August, 2015 through February, 2016: A bit better

I love a boring summer stock market.  Nothing much seems to be happening.  We in the U.S. are in the middle of the typically weak summer period. So,looking forward towards winter when the market typically had recovered, 6 month stock market performance will probably be a little better than average.

Here is what my econometric models are predicting:
U.S. Stock Market Forecast (Value Line Arithmetic Index):
Probable stock market gain 8/1/2015 to 2/1/2015: 6% (Avg. 6 mo. gain since 1984: 4.8%)
Probability of at least breaking even : ~ 80%   (Average for all months since 1984: 73%

So, why is a boring stock market wonderful?  Because the market is unlikely to crash really soon. Some things in life are very simple.

If all things happen as they 'typically' do in the economy, my personal bet is that the market will have its next serious upset in a couple/few years. (My mathematical models have no opinion on this -- they only look 6 months ahead.)

Here is how the the predictions of my forecasting models and actual performance of the stock market have landed over the past 8 years:

(Click on image to enlarge.)

As shown in the chart above, the U.S. stock market (measured by the ValueLine Arithmetic Index) has done pretty much what my models had expected for the past year or so. Actually, my forecasts have matched the market unusually well.  Since the models are based directly on what the market usually does in response to macro economic factors, this probably means that no really major strange outside factors are driving the market.

The great protective shield of historically low interest rates that has been maintained by the U,S, Federal Reserve Bank has made this huge bull market happen.  It is pretty easy for businesses to make money when they can borrow money for next to nothing. In a few years the current odds are that the U.S. economy will have become frothy. That's when the Fed will jack rates up rapidly and 'take the punch bowl away from the party'.  But, that's what is likely to happen in a few years -- not now.  Enjoy summer!