Posted on 01/09/2006 8:07:33 AM PST by SirLinksalot
Omens, Good and Bad
The market held to a familiar pattern last year, but S&P sees little reason to believe that is a meaningful sign for 2006
Last year wasn't great for the S&P 500, which finished 2005 with a modest price gain of 3%. But it was true to form: Stocks finished higher in a year ending in 5.
That's been the case for all such years over the past eight decades, though there is no logical explanation for the phenomenon. Over the same time period, the Dow Jones Industrial Average exhibited the same behavior in those years, until 2005. Last year the Dow eased 0.6%.
What, if anything, does the pattern of gains in years ending in 5 imply for market action this year? In the preceding seven decades, six of the seven years ending in 6 were also up. That 86% positive follow-up might be considered a good omen for 2006. But the bad news is that in every single case, the percentage gain was less than in the prior year.
On the other hand, if the first trading week of 2006 is any indication, investors appear willing to bid up stocks as the end of the Fed's rate-tightening cycle comes clearly into view. We think the recent optimism will soon bump up against some negative headwinds, leading to a year of fairly modest gains.
SNIP SNIP
We continue to believe that this year will be slightly better than last, with the S&P 500 ending at 1360, for a gain of about 5.8% from the close on January 6.
(Excerpt) Read more at businessweek.com ...
IMHO, for a variety of reasons, the market is not reflecting the true strength of the economy yet and is due for a nice bump up.
As things are right now I agree with this analysis. One monkey wrench that might get thrown into the mix though is the coming show-down with Iran. Whether it's military or not it will probably affect oil prices greatly.
There sure are a lot of things hanging fire that could cause a break either way! I'm thinking most of them will smooth out and either go the right way, or just go away entirely. As usual, who knows? And if they do know, they ain't tellin!!!
I don't believe one's only investment should in funds tied to the S&P500, however!!! I want my stock funds beating the indexes as regularly as possible!!!
"One monkey wrench that might get thrown into the mix though is the coming show-down with Iran. Whether it's military or not it will probably affect oil prices greatly."
Yep. We have two real enemies: Militant Islam and Militant Islam funded by oil revenues. Our country must break free from Middle Eastern oil or we shall never defeat Militant Islam.
"One monkey wrench that might get thrown into the mix though is the coming show-down with Iran. Whether it's military or not it will probably affect oil prices greatly."
Yep. We have two real enemies: Militant Islam and Militant Islam funded by oil revenues. Our country must break free from Middle Eastern oil or we shall never defeat Militant Islam.
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