Where does the market go from here?
Johnson, chairman and Chief Investment Officer of Albany, NY-based Johnson Illington Advisors, is expecting the S&P 500 to rise by five percent by the fourth quarter. The index , which is about 770 and widely followed by money managers, will rise to 800 by the first quarter 2010 based on a "statistically consistent" analysis of trends like corporate earnings, he said.
But Johnson encourages people to take his prediction with a grain of salt.
"I don't know where the market is going," he said. "Have I seen anything that resembles this? Well, the answer is no . . . . Personally, I would pay you nothing for this forecast."
Smaller cap stocks have been outperforming larger caps. Consumer staples, health care an utilities tend to outperform in bear markets as they have done lately. Consumer cyclicals, industrials and technology are the sectors that tend to do well when the economy improves, according to Johnson. He advises investors who say they want to have 35 to 65 percent of their holdings in stock to have 35 percent in their portfolio.
So far this year, the market has offered no respite for battle-weary investors who were pummeled by tumultuous market last year. Both the S&P 500 and the Dow Jones industrial average have plunged more than 15 percent. Meanwhile, gold prices are flirting near $1,000 as investors flee equities for safe havens. The Dow got pounded by triple-digit losses again today.
The bad news has scared some investors so much that they won't even read their brokerage statements.
Tiimothy Ghriskey, the chief investment officer of Solaris Asset Management Management, points out that the market sentiment has moved from optimistic to cynical over the past few months as events on the economic stage including the debate over the economic stimulus began to unfold. The uncertainty continues.
"Will Citi (NYSE:C) of B OF A (NYSE: BAC) be nationalized?" asks Ghriskey, whose firm manages $2 billion. "We don't assign a high probability to that but its a possibility."
Ghriskey is somewhat optimistic, expecting the market to remain range-bound. Investors looking for better returns might want to look to Latin America.
"Mexico is supposed to have positive growth in GDP as is Chile and Brazil," said Jim O'Leary, manager of the Touchstone International Growth Fund, which has has positive cash flow. "The stock market in Brazil is actually positive."
For now, though, the market which has stumped the experts shows no signs of becoming easier to read.