Stock Market Outlook: Holding Pattern Until The Fall!

This stock market has really been historical over the last 12 months. 2009 in and of itself has been quite a ride, but where does this leave us? The market has been stabilizing and trading in a range for two months. There may be a big move to the upside this Fall out in front of the heavy inflation to follow.

The wicked swings are not as frequent, and the VIX (^VIX) has been going lower and lower. Although the volatility it is still relatively high by historical standards, the market does appear to be getting calmer and calmer.

S&P in a Range

Unless there is some game changing data over the summer the market is not going to see any big swings until the Fall. The financial carnage is now under control in an economy that has been able to buy time with massive government stimulus.

Bernanke and many others have said “Recovery late in the Year (2009)”. I think there will be real signs of strength in the Fall, when a lot of the stimulus really kicks into high gear. Tech appears to be strong and getting stronger and will be a real leader in a market that moves big to the upside.

Real growth in the US economy will continue to be sluggish net of inflation, but the stock market is going to move higher at a faster pace than some people are anticipating because of inflation.  

Deflation and Inflation are razors edge in this economy, and inflation will win! The inflation fears in the Fall with be in high gear as well, and the Fed is certain to be raising rates in early 2010. The S&P (^GSPC) at 1000 or 1100 will not be the same as it was in the past when adjusted for inflation that will be running at about  5% a year or higher.

Historical

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