The Long, Ugly Decline in Stocks Has Ended
Volatility remains and most of this year's gains have been made, but a return to normalcy is just around the corner.
By Jerome Idaszak, Associate Editor, The Kiplinger Letter
June 12, 2009RELATED FORECASTS Commodity Prices Won't Go Much Higher
HELPFUL LINKS Market analysis
EDITOR'S PICKS Higher Rates Won't Sink Home Sales
What to Do in the Face of a Pandemic
The bear market in stocks is over. That's worth celebrating. Benchmark indexes are unlikely to revisit their lows of early March. However, little gain seems likely from now to year-end.
The big rebound is likely past. The Standard & Poor's 500 index is up about 40% since its March 9 trough. A decline of 10% or so wouldn't be unexpected, and if oil prices and bond yields continue to rise, the risks outweigh the benefits in the short term. "A correction is lurking out there," says Sam Stovall, chief investment strategist with Standard & Poor's.
For all of 2009, expect the major indexes to rise 5% to 8%, including dividends. Our current judgment is for a modest economic recovery in 2010 with gross domestic product up about 2%, which spells similar stock market gains next year as well.
Over the longer term, the story gets better. After this decade's scalding, with stocks down on average 3% a year, there will be a return to normalcy over the next decade: a 10-year annual average in the neighborhood of 10%.
Volatility remains and most of this year's gains have been made, but a return to normalcy is just around the corner.
By Jerome Idaszak, Associate Editor, The Kiplinger Letter
June 12, 2009RELATED FORECASTS Commodity Prices Won't Go Much Higher
HELPFUL LINKS Market analysis
EDITOR'S PICKS Higher Rates Won't Sink Home Sales
What to Do in the Face of a Pandemic
The bear market in stocks is over. That's worth celebrating. Benchmark indexes are unlikely to revisit their lows of early March. However, little gain seems likely from now to year-end.
The big rebound is likely past. The Standard & Poor's 500 index is up about 40% since its March 9 trough. A decline of 10% or so wouldn't be unexpected, and if oil prices and bond yields continue to rise, the risks outweigh the benefits in the short term. "A correction is lurking out there," says Sam Stovall, chief investment strategist with Standard & Poor's.
For all of 2009, expect the major indexes to rise 5% to 8%, including dividends. Our current judgment is for a modest economic recovery in 2010 with gross domestic product up about 2%, which spells similar stock market gains next year as well.
Over the longer term, the story gets better. After this decade's scalding, with stocks down on average 3% a year, there will be a return to normalcy over the next decade: a 10-year annual average in the neighborhood of 10%.
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