Hope you find the previous market forecast 2008 part 1 and part 2 interesting...
Here is the bottom line summaried by Bernie Schaeffer...
The Bottom Line
** I expect that stock-market volatility will begin to recede in 2008 from the elevated levels seen in 2007. As the risk aversion trade begins to unwind, risk appetites will likely return to more normal levels. I also project outflows from domestic equity mutual funds - which approached record levels in 2007 - to moderate substantially and perhaps even revert to inflows as volatility begins to diminish and U.S. stocks begin to rally. Such a reversal would be quite supportive for further gains in the U.S. stock market.
** The fourth year of a Presidential term has historically been bullish for stocks, as has a situation of bipartisan rule (Republicans in the White House; Democrats ruling Congress, or vice versa). Both of these factors are likely to have an impact on stocks in the next 12 months.
** Crude oil may remain near all-time highs, but I would not be surprised if they pulled back to levels that would cause less alarm. The recent surge in prices has been the result of demand, not supply. Consumers have continued to adjust to rising fuel prices, and $3.00 unleaded didn't crimp spending any more than $2.00 gasoline did. In fact, a dramatic plunge in oil prices could potentially signify that something was off with the overall economy or market.
** Earnings across the board will remain challenged as the housing and credit crises proliferate in the coming quarters. But strong growth in sectors such as technology and utilities will help boost the average, potentially well beyond the dour expectations of many analysts. Positive earnings surprises could be a major catalyst for buying power for stocks in the first half of next year.
** Long-term trendlines held up despite dramatic pullbacks this year, confirming that the bull market remains intact. One of the primary moving averages to watch is the 80-week trendline on the S&P 500 Index.
** Concerns that the current market is at risk of a "bubble burst" similar to that endured in 2000 are unfounded. Stocks are priced at more reasonable levels, fear and caution dominates investors' minds as opposed to greed, and there is skepticism (if not downright pessimism) on Wall Street and in the financial press in their outlooks for 2008.
** Look at outperforming, underloved names from the alternative energy and e-commerce sectors for profitable opportunities in 2008 (see below). Metals stocks (particularly from the copper sector) also look promising.
** One sector to avoid in the new year is the large-cap healthcare group. Drug stocks have, as a collective, made virtually no progress this decade after a huge run higher in the 1990s. The combination of the well-known challenges of the industry (generic encroachment, FDA challenges) and continued optimism among analysts should keep capping the appreciation potential of this sector. This is a very broad sector, however, and there could still be some opportunities from the small-cap biotech segment.
** Pay attention to small- and mid-cap growth groups, e-commerce stocks, metals issues, and industrial cyclicals. Also, opportunities in international stocks, which along with multinational companies should continue to benefit from a weak dollar.
** And finally, the real "bottom line to the bottom line" is that while long-term levels of technical support look very reliable, and the backdrop of skepticism is compelling, the wild card is the Fed. All projections come with the very real caveat that an error in monetary policy will almost certainly result in taxing times ahead. The wrong decision could spur a selling campaign that forces long-term moving averages to give way, effectively justifying some of the pessimistic sentiment we've seen. I just hope that Bernanke and his cohorts make the right choice for the economy and the stock market - which is to cut interest rates aggressively without regard to bogus inflation fears.
(Disclaimer: the information provided here is served as reference only and does not constitute financial advice. Pls seek professional consultancy, if needed.)Feed Shark
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