First, I'm no market predictor and my crystal ball is as good as yours. I try to digest what experts are saying (from negative return to 25% gain) and try to make a conclusive conclusion . We should predict at 3-month intervals and plan accordingly. Market conditions change and hence it is not beneficial to predict for the entire year.
Being said, I predict we've the same volatility on the market based on headlines. After half a year and assuming the Euro problem resolved, we should be on our upward swing to a 10% gain (S&P and not counting dividends) at the end of the year.
If we believe the market will be volatile with no gain at the end of the next three months, we should sell covered calls, buy low and sell high on deeply valued stocks, but remain a good percentage in cash. I put my money where my mouth is so far. However, I'm an opportunist and change direction when I see fit.
Click here for why I have a rosier picture. Remember the market is usually 6 months ahead of the economy.
The following is based on my Oct 7, 2011 post My crystal ball. At least for the first 6 months of 2012, most are relevant so there is no need to update.
The perfect storm with the following unknowns:
* Portugal, Spain and Italy could follow Greece. They are far larger than Greece.
Click here for detail.
* Trade war with China over currency.
Can we afford to have a trade war with China and take the risk of China pulling out their huge debt from us?
Click here for detail.
If one of the above two happens, we will see Dow below 9000. Otherwise it will cruise between 10,500 and 12,500 (used to be 12,200).
When it goes up to 12,800 (used to be 12,500), I'll sell most of my stocks as the roots of our problems have not been resolved.
If you believe we'll have a good Q3 earning announcements, year-end rally, first two-week rally, huge cash held by corporations, and/or there are signs the wars are ending (update: one is done), you may want to act accordingly. I've started buying selectively and it could be the best time for a while for some stocks that have been beaten down badly.
My crystal ball is as good as yours.
(c) TonyP4 2011. Written in 12/11/11. Updated 01/10/12.
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Disclaimer: All my posts are for informational purposes only. I'm not a professional investment counselor. Seek one before you make any investment decision.
Posted by TonyP4 at 5:25 AM
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My predicted 6% for 2011 is off. Including about 2% dividend, then it is not too far off.
ReplyDeleteMiddle East became another unknown factor recently.
Actually my predication of 6% for 2011 is right on target as the Dow is 5.5%. I was smart not to say whether I compare to Dow or S&P or with/without dividend.
ReplyDeleteRyandan said:
ReplyDeleteThanks for some real perspective Tony. The hedge funds are trying desperately to pull in the little investors again and then you'll see a 15% - 20% drop in stock prices as they pocket the little guys money. The whole world is in decline and we're supposed to tear off our clothes and sell them for stock money. Just a few months ago everyone was being told to invest in emerging nations - which are now sinking in the mud. Spread every lie you can then profit on the correction. Wall Street is Latin for corruption!
The predicted 10% is in high side of the range. We could drop to 5% quickly if EU crisis is getting worse.
ReplyDelete