Stock Market Forecast January 2017 through June 2017: Negative

Over the second half of 2016 my stock market forecasting models had expected the U.S. stock market to go nowhere.  Instead, the market staged a strong 11% increase.  I was pretty far off base. (Sam E. -- You won this round!)

What's going to happen now?  My models still see disappointment coming -- roughly a 5% market decline over the first half of 2017.

The econometric models don't know anything about what the Trump administration will try to do for the U.S. economy, or what Congress will actually vote for.   All the models say is that compared to the last three decades of market behavior, stock prices are pretty high.  Some unrealistic economic hopes are likely to evaporate.

For the first half of 2017 the market is not expected to make a huge move either up or down. Calling any major market move is all that my models are actually trying to accomplish.  Precise prediction is beyond the forecasting models' scope. So, on that score my models do not see things aligned to force prices into a huge and lasting move either up or down.  If, however, the market does shoot up or crash down over the next few months, the models will expect the market to retrace its steps.

If long term economic factors exert their normal force on stock prices, most probably U.S. stocks will be about 5 percent lower come summer.  The probability of breaking even is only about 40% -- much lower than the long term record of the market at least breaking even 73% of the time.

(Click on image to enlarge.)