Jan 1, 2008 market forecast from permabull lol
With Wall Street analysts forecasting where the market will be 12 months from now, I figured I would take a crack as well. As an overview, I expect market volatility to continue throughout the first quarter and mid-way through the second as well. Then it will be clear to all that the U.S. never was in a recession, we will start hearing companies talk about how well their businesses are doing, and analysts will re-work their estimates higher. The second half of the year should be very strong for markets with the potential caveat of some kind of unexpected result in the upcoming U.S. presidential elections.
I think that the Dow will end the year at 14,350. The S&P 500 will be at 1,630, a nice gain of over 11%. The Nasdaq is the interesting index to predict. In ’07, the Nasdaq finished up a drop under 10%, but much of that gain came from just three stocks, Apple (NASDAQ: AAPL), Google (NASDAQ: GOOG), and Research in Motion (NASDAQ: RIMM). With the exception of RIMM, I have a hard time believing that Apple and Google will repeat their ’07 performances. That being said, I do think that we will have more strength in the broader market so look for the Nasdaq to be at 3,025 in a year.
Aaron Katsman is the lead Portfolio Manager and Managing Director of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com. Disclosure: Writer has no position long or short in any stock mentioned as of 1/1/08.
As most of us struggle with surging gas prices, food costs and the possibility of losing our jobs, it’s good to know that one little niche of people are oblivious to the current economic environment, and continue on with business as usual.
Sales of Fiat’s Maserati brand are up 16% this year, as the rich continue to buy the $115,000 car. Add on that the Maserati gets a whopping 13 miles per gallon in the city and 19 on the highway.
Maserati’s are being sought after by buyers wanting something better than your typical Mercedes-Benz, yet more affordable than Italian competitors Ferrari and Lamborghini. Nice to know that even these buyers are impacted by sticker shock!
According to an article in Bloomberg, Wes Brown who is an automotive analyst commented: “If you’ve got money, you want people to know you’ve got money, and people want to find something that not everybody has,” Brown said. “They are saying, `I don’t want a BMW or Mercedes, which you can see on every corner.'”
We all know that problem! Who can afford to buy a Maserati? The company says that the typical buyer is a 54-year-old male with household income of $750,000.
For those of you who decided to leave your car at home and take the bus in order to save a couple of bucks, you’ll be glad to know that by freeing up the road, that new Maserati owner will have less traffic to deal with and be able to take the car up to its top speed of 177 miles her hour.
Who cares if gas is over $4 a gallon?
R.G. “Kelly” Caldwell Jr. is CEO, president and senior trust officer at Caldwell Trust Co. in Venice.
The stock market took us on a bumpy ride over the last 12 months, but despite hysteria about the “credit crunch” and plunging real estate prices, 2007 ended as an average year.
The Dow Jones Industrial Average closed out 2007 at 13,264, 801 points higher than the beginning of the year. That’s approximately a 6.4 percent price change. Allowing for dividends received, the Dow posted a respectable 8.9 percent total return — very typical of market performance for the past 50 years.
At Caldwell Trust Co., we remain optimistic as we chart 2008 investment programs for our clients.
To make it easier, use fewer and larger categories: cash, fixed income, international stocks, small-cap, mid-cap and large-cap stocks — and don’t forget to add in your real estate.
The first time we analyze a portfolio, many clients are astounded, first by their total amount of assets and second by where their money is and is not invested. Once you understand your true market position, you can determine your investment goal and map the best way to get there.
As with a road trip, you must first consider your individual goals and needs. Then you can decide whether you want the shortest route, even if road conditions are uncertain, or the safer but possibly longer way. Will you choose safe investments that may grow more slowly or the potentially highest absolute return regardless of the risk?
We manage client funds on a risk-adjusted basis, according to each client’s circumstances. In today’s complex world, our clients typically have from 50 percent to 75 percent in stocks, with the balance in fixed income and yield-producing securities.
Of the 50 to 75 percent in stocks, we generally recommend placing half of it in large-cap stocks as core holdings.
A few examples of such core holdings are ExxonMobil (XOM), Caterpillar (CAT) and Procter & Gamble (PG). A few other large-cap stocks that we like are PepsiCo (PEP), Parker Hannifan (PF) and Becton Dickinson (BDX).
We break the remaining half into smaller positions in international and growth stocks. As an effective way to invest internationally, we utilize exchange-traded funds (ETFs).
We like international ETFs from Barclay and Vanguard and also have positions in iShares Canada (EWC), iShares China (FXI), Vanguard All World ex Us (VEU) and Vanguard Emerging Markets (VWO).
Growth stocks require careful watching. A few of our favorites today are Gilead Sciences Inc. (GILD), America Movil S.A.B. de C.V. (AMX), Steel Dynamics Inc. (STLD), WellPoint Inc. (WLP) and Roper Industries Inc. (ROP).
Looking down the road in 2008, we anticipate more of what we saw in 2007: a few bumps, a lot of market noise, continuing headlines about the “subprime credit crunch” and “real estate bubble” — and another positive year.
Overall, we see the roadway eventually smoothing out, with our economy slowing but still providing a solid foundation for investors.
Harald Hvideberg is chief investment officer at Wood Asset Management Inc. in Sarasota.
Financial markets around the world faced considerable turbulence during 2007. It was a tumultuous year for stocks, where the equity market returns were vastly different depending on the sector. It was a very good year for energy and material companies linked to global growth, while it was not good at all for stocks linked to the housing and mortgage markets.
Industrial commodity prices continued to move higher, with crude oil prices almost doubling in 2007, driven by strong global demand and a falling U.S. dollar.
The subprime mortgage crisis in the United States and the ensuing credit crunch sparked concerns about a U.S. recession and sent many investors into less risky government securities, resulting in a great year for Treasury bonds. Gold also benefited from this “flight to safety” and a falling U.S. dollar.
We believe it will continue to be difficult to navigate the financial markets in 2008. The U.S. housing market will likely continue to soften, and the credit crunch will make financing more expensive and harder to come by, effectively slowing down economic activity. Consumer spending could experience the sharpest slowdown since the 1991 recession.
However, we do not believe the U.S. economy will slip into a recession in 2008, primarily because the Federal Reserve has shown a willingness to be proactive by reducing the federal funds rate (the overnight lending rate between banks). We believe the Federal Reserve will continue to do what it can to prevent a recession by announcing further cuts to the federal funds rate in 2008.
Outside the U.S., we are starting to see evidence that developing economies are starting to slow. A combination of slower growth in the U.S., Europe and Asia and a stabilizing, or perhaps even a stronger, U.S. dollar could bring about a modest pullback in oil prices.
This would be good news for equity investors, as lower oil prices typically result in higher price/earnings multiples. We believe the tailwinds from lower interest rates and lower oil (and gasoline) prices would outweigh the headwinds from a slowing economy and weaker corporate earnings growth. As a result, as long as the U.S. stays out of recession, we believe the U.S. stock market will post a sixth straight winning year in 2008.
Stock picking will be more important to overall success in 2008 than in 2007, as we believe it will be more difficult to make sector calls this year. Financial stocks will likely not perform as poorly as they did in 2007 given a more favorable yield curve environment, a Fed in easing mode, and more compelling valuations. Also, the “late stage cyclical” play on growing economies outside the U.S., led by energy, materials and global industrial companies, might lose some steam in 2008.
At Wood Asset Management, we continue to favor companies with excellent management teams, leading industry positions, strong and predictable revenue and earnings growth, and attractive valuations. Corning Inc., CVS/Caremark Corp., Johnson & Johnson, and Apache Corp. are among the stocks we believe will do well in 2008.
My Forecast for 2008
Don’t count on a recession but look for stocks to have a good year and Democrats to take control of the White House.
By Jeremy J. Siegel, Contributing Editor
Nobody knows for sure what will happen in the coming year, but the demand for predictions is so high that I will throw mine into the ring. Let’s start with the economy. There will be no recession in ’08. The economy will start the year slowly, with the gross domestic product growing less than 1% in the first quarter (after a similar increase in the last quarter of 2007). By the middle of the year, the economy should begin picking up steam; it should grow 2% to 3% in the second half.
By June, the subprime-mortgage disaster will ease. Although delinquencies will have risen, the foreclosure crisis will ebb as most lenders make deals with beleaguered mortgage holders. As the housing crisis eases, the flow of credit will return to more normal levels and lending will revive. However, home prices will keep falling or remain stagnant at best. Prices of real estate just got too high during the last boom, and down cycles for housing last much longer than they do for the stock market.
The slow economy will keep inflation under wraps, but energy prices are likely to stay high. Overall inflation will run 2% to 3% in 2008, and core inflation (that is, excluding certain volatile items, such as food and energy) will remain a bit more than 2%, the Federal Reserve’s limit for “acceptable” price increases.
Prospects for stocks. Shares should have a good year, returning 8% to 10%. Stocks will rise as economic growth picks up in the year’s second half and head winds from the credit crisis ease. Earnings will take a hit in the first quarter of 2008, but profits will begin to recover by the second quarter. Stocks are reasonably valued, even when priced against poor earnings. Once earnings increase, stock returns will be considerably better.
Financial stocks, by far the worst-performing sector in 2007, could well be the best in 2008. Foreign stocks, which I have long recommended, will continue to do well. But if the dollar rises, foreign stocks won’t benefit from currency gains and might lag U.S. stocks. As the U.S. economy slows, Chinese stocks will continue to cool — plus, they’re likely to suffer a hangover after the Beijing Olympics. Still, investors should maintain a diversified portfolio, with about 40% of their stocks allocated to foreign markets.
Columnist Jeremy J. Siegel is a professor at the University of Pennsylvania’s Wharton School and the author of Stocks for the Long Run and The Future for Investors.
Bear: dont let the permabulls scare you with their uberbullish SPX 1300 forecasts. Look at how horribly wrong the mainstream was in Jan 1 2008.