Doesn't Look Like We're in for Any Big Rallies

Going with my gut feeling about the stock market, I'd say the S&P 500 Index will slowly decline from its current level. It may or may not retest its November low, and then I think it will just trade in a range around 800 for quite a while. This is my best guess at this time and it is part of my forecast for a long and tiresome bottoming out period for the stock market.

I believe we're in for a period of lackluster trading ranges, as the stock market tries to figure out just what will happen to the economy in 2009 and beyond. There's going to be a lot of new fiscal policies coming from government, so a lot is up in the air over the next few quarters.

The stock market is forward-looking, but I don't see the market undertaking any big rallies this year, unless there's some magical shock to the system that we can't foresee. Right now, investors seem to be waiting for a new catalyst. They seem to be waiting for a new trigger in their portfolios to take some sort of bold action. I just don't see any new catalyst on the horizon and, accordingly, it's probable that we're going to have a very unexciting stock market environment in which to speculate.

Already, large-cap companies are reporting fourth-quarter numbers that are generally meeting previously reduced expectations. The important part, corporate visibility, is so far building a consensus. Companies are expecting a flat 2009 in terms of revenues and earnings.

So, cash will continue to be king going forward and the time is getting right to consider some solid, dividend-paying stocks for the long term.

In other asset classes, one of the most attractive areas now is real estate. Not necessarily for speculative purposes, but really for living purposes. Borrowing costs are very attractive right now and if you've got good credit, you've got a lot of power to negotiate a new mortgage. With both short- and long-term rates quite low, there is a lot of mortgage renegotiating going on right now. The numbers illustrate that this demand, however, isn't translating into much in the way of net new mortgage demand.

And so, I really think it's going to be an unexciting time for a financial market businessperson over the next several quarters. Perhaps it's worth considering going into dried goods.

Profit Confidential

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