I’ve gotten enough emails on this that I figured I should address this (pardon the self promotion):
I did an interview with Smart Money this past week on my longer term expectations for the equity markets. The piece is called Enjoy It While It Lasts. It covers what I expect to be the last leg up in this aging cyclical Bull rally, and what that sets up for 2006-07.
The ubiquitous excerpt:
"FIRST, THE GOOD NEWS. According to Barry Ritholtz, chief market strategist at Maxim Group, an investment management firm in New York, stocks are about to experience the biggest rally of the current bull market.
"If my timing is correct, and if my macroeconomic assessment is correct," says Ritholtz, "there will be a rally from June through November. That period — that five-month period — will encompass a significant rally. Historically, the last rally of a bull market tends to be the strongest within the cycle."
Ritholtz bases his assessment on a number of factors including trends in inflation and long-term Treasury yields, investor sentiment and the limits of the federal government’s ability to stimulate the economy. As for the latter, following aggressive campaigns to cut taxes and hike rates, he feels the White House and the Federal Reserve have all but exhausted their options for sparking economic growth.
Which leads us to the bad news. If Ritholtz is right and this is, indeed, the last leg of this bull market, then next year is shaping up to be an ugly period for equities.
Those of you who’ve been reading me awhile know I do not put alot of stock in these sorts of long term predictions (or the Folly of Forecasts, as I like to call them); There are simply too many intervening data points to guesstimate what happens between now and the end of 2005, and that sets up a possible bottom in the 2006/07 time frame.
That said, I lay out a very possible scenario, one that is not totally unlikely. Just remember as you read it that these "prognostications" are always subject to change.
Enjoy It While It Lasts
Smart Money, June 2, 2005 The Pro Shop: