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Market Forecast for the Next Year
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Sorgel
08-06-2008, 4:44 PM | Post #2547996 |
7 Replies
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I would like to divulge my thoughts and my reasoning as to where I think the market is heading. Reasons for the Recent Rebound: 1. Credit Crunch isn't as bad as we thought - First and foremost, the credit "crisis" wasn't as bad as everyone thought it was, banks like Wells Fargo and US Bancorp are doing just fine. The market was pricing in a catastrophe, but it only got a small disaster.
2. Dropping Oil Prices- In June oil had reached close to $150 dollars a barrel and people were speculating that it would go up to about 170$ to 200$. Oil like anything else is subject to supply and demand. Americans respond to price increases just like the rest of the world. So with higher gas prices Americans are driving 40 billion miles less than they were before. In China, the government decided to rise prices to cover the rising cost of the commodity. And in the Middle East the oil giant announced they would increase output by about 10%. When the world's largest consumer of oil consumes less, the worlds largest and fastest growing country raises prices, and the worlds largest oil producer increases production...what happens? By the laws of supply and demand the price of oil will go down.
With that aside, lets look at where the market is going now. Reasons why the market will continue to go down for the next 6-15 months: 1. Politics - Every presedential election the market always tends to go down. By the looks of it, we will probably have a democratic president. When a democratic president takes office their is always a bigger retraction in the stock market because of higher taxes.
2. Inflation - Dropping oil prices has given the market a gleam of hope and has triggered a rebound. The problem is we are still dependent on a resource that has a finite supply. From this it would be hard to imagine oil ever dropping below $100 barrel again. Everything that you buy in retail stores is effected by higher energy costs because of shipping. If retial absorbs the higher costs then their will be less profits, if they pass down the expense to consumers they will buy less.
3. Tighter Lending Policies - With the credit market tightening its standards and increasing captialization, it is much harder to get a loan. Loans are a big driver of growth for companies because it gives them the fiscal resources to expand their operations into new and existing markets. Although corporate lending is a much better business to be in than mortgages. The defaults from mortgages has affected the money supply for the other loans, such as for corporations.
These 3 factors, I think, will contribute to the continued retraction of the market over the next year or so. It is hard, if possible at all, to predict the exact bottom, but as corporations adjust their operations around the new obstacles that face the free market today, you will eventually see them rebound and rally in the near future (1-2 years from now). Feedback is certianly welcome.
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Re: Market Forecast for the Next Year
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judyken
08-06-2008, 8:20 PM | Post #2548101
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The fun part of projecting is that there is no right or wrong answer until the future gets here. We haven't seen the results of overbuilding in the commercial market yet, so we have that to look forward to. Credit cards are overextended and we are just starting to see some of that reaction now in the market (American Express). Eight banks have gone broke already - the good news is that most of them are small (execpt Indymax). Unemployment is on the rise, but it doesn't look like its going to get to be too bad (unless you loive in Michigan, Ohio or Indiana). Manufacturing has held on pretty good, but is showing signs of decline. Food commodity prices have taken a downward movement, but most farmers sell their crop before its even planted and most I know have sold over 80% of this years crop already (at higher prices). The govt. can't bail out all the overextended people in our country so the press will highlight those getting caught in a weaker economy. I know of many people who are already moving money around in anticipation of a Democratic Pres. and new tax laws taking effect shortly thereafter. This is going to hurt the economy in the US. As a side discussion; what percent of Exxon's profits come from their operations in the US versus the amount of profits they generate from outside US? Hint: it is less than 50%, so we want to have an excess profits tax on earning generated outside our own country. It we can get away with it, why don't we tax Petrobras and some of the other international companies? In summary a long not severe recession that will drag on for years. Ken
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Post removed for violation of Terms of Use (Inflammatory)
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Re: Market Forecast for the Next Year
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closer
08-06-2008, 10:41 PM | Post #2548148
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Beyond the fact that Japanese Government Bond yields are falling tonight as the Nikkei declines, we don't know how the markets are going to behave tomorrow, much less next year. With AIG reporting a multibillion-dollar writeoff after the market closed today and with initial unemployment claims and Fannie Mae reporting tomorrow, the rally might turn into a grizzly rout. Yesterday, I heard Pimco's Bill Gross on a radio interview say that the Fed shouldn't even be thinking about raising the interest rate because inflation is not the core problem. Rather, we are experiencing the worst asset deflation since the Great Depression as property values plummet and commodity prices begin to fall. The last thing the Fed needs to do, Gross said, is raise interest rates which would tighten credit, drive up mortgage rates, and kill the recovery.
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Re: Market Forecast for the Next Year
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uncleharley
08-07-2008, 9:04 AM | Post #2548266
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It might be impossible to predict the future with absolute accuracey, but it doesn't take much to observe current events and trends and then conclude what the most probable scenarios are. Anyone who has ever planned a birthday party has done that. As for the the stock market, next year; We know that we are currently in a bear market. We know that the USD has been in a protracted bear market and is currently stableizing. We also know that the trade deficit is slowly improving. We also know that GDP is not at recessionary levels. We also know that we have a major election coming up in november. From those facts I conclude that the stock market will be flat until the knew President has been elected. The stock market will then begin to recover by having a rally through the end of the year. Beginning about the 1st of next year the market will begin a see-saw action that should last about 9 to 10 months. BTW, I am 65 years old and if you doubt what I have just posted, simply file it away and bring it out several months from now. uh
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Re: Market Forecast for the Next Year
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Sorgel
08-07-2008, 11:20 AM | Post #2548336
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 Katmanndu:You just plain got your facts wrong. Presidential elections have traditionally resulted in a post election bounce for the stock markets up until 2000, which happened to be the year that the tech bubble burst. And where was the "bigger retraction" in the stock market during the Clinton administration? Despite higher taxes, the markets and the economy saw an unprecedented boom during Clinton's two terms. And despite the claims you hear from Democrats or Republicans, there is no evidence the stock markets thrive under one or the other. And it is not hard to predict the exact bottom, it is just plain impossible. How are old are you, by the way?
So taxes have no effect on the economy at all? That is quite doubtful. It also seems that your looking to pick a fight here, the question shouldn't be how old am I, but how mature are you? And as for Clintons term, the tech "Boom" was built on speculation, Tech firms had virtually no profits excluding a few gems. It wasn't uncommon to see stocks trading above a 60 P/E ratio.
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Re: Market Forecast for the Next Year
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rebe945
08-07-2008, 12:20 PM | Post #2548359
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Are we arguing about seeing into the future or the past? I don't even try. Rich
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Re: Market Forecast for the Next Year
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openhurdle
08-09-2008, 9:12 AM | Post #2548997
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uncleharley: BTW, I am 65 years old and if you doubt what I have just posted, simply file it away and bring it out several months from now. uh
uh, did you file away any of the previous posts? - I was the one that said to load up the Oil truck in Jan 2007 when Oil was at $50, who listened? - I was the one that kept telling everyone throughout 2007 during sharp corrections in Oil that the bull in Oil was not over by a long shot while most here were bearish. Who listened? - I was the one that most of 2007 said triple digits was coming in 2008 and was HERE to stay. Who listened? I know who listened, Judyken who said late 2007 that I "kept preaching the same song and I was not worth listening" (gosh I wished I had saved that post...). Funny like NOW I read from Judyken and others now that triple digits are here to stay and hardly anyone sees Oil dropping below $100. Nice to know people have discovered **reality**. Too bad they have discovered it AFTER THE FACTS, meaning it's too easy today to say Oil will not drop below $100 when Oil today trade way over $100. Who listened to my screaming of triple digits Oil in 2008 when Oil at that time was trading $70? ANSWER: NO ONE And the best of all? I said in 2007 a strong possibility to see Oil topping at $150 in 2008, although at that time I was not sure 100% of that happening since a rise to $150 in a few months would have meant a parabolic rise). What did Oil do? It topped around $147. Even this call I got it just about correct... Once again, who listened? You tell me... Those are the facts. The posts are all in this forum; just do a search to see what I mean
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