Mauldin's 2005 forecast

The economy is going to be good, so I don't think we see the start (yet) of the next major bear leg, although this year will mark the high for what I think will be many years. This will be a frustrating year for stock market investors. You can always do well if you are a good individual stock picker, but broad indexes and mutual funds are not the place to be. The market is a sideways to down market, with the risk to the downside as we get toward the end of the year and a possible recession on the horizon in 2006.

And not to put too fine a point on it, I still think we are in a long term secular bear market. In a few years, we will look back and realize this was a bear trap - another sucker rally.

http://www.investorsinsight.com/article.asp?id=jm010705


What did he say last year?

This is a momentum market. The best way I can summarize my views is to tell you of a bet I made today. It is a small amount, to be sure, but ego is on the line. Let me emphasize this is a guess. I have no "model" or crystal ball.

If you add the closing year end numbers of the S&P 500 and NASDAQ together, I took the under for the year. That means I think the combined price of the indexes will decline. If the S&P 500 does indeed rise, I expect the NASDAQ to fall more. I would also take the over for May, as a further rally may be in the future. I think a continuation of this rally is quite possible, as earnings should do well, and investors seem to be happy with the short-term. But the upside does not seem to me to be all that great. I would buy value and yield and have a trailing stop loss. How close would depend upon your own particular circumstance.

It might be more helpful to give you the opinion of Richard Bernstein, the Chief Strategist for Merril Lynch, who sees the S&P 500 at 1010 at the end of the year. The technical analysts at UBS see a first half rally and a second half decline.

The S&P closed 2004 at 1211.92 after closing 2003 at 1111.92. Exactly 100 points!

The Nasdaq closed 2004 at 2175.44 after closing 2003 at 2003.37.

http://www.2000wave.com/article.asp?id=mwo010904