Rather than trust markets to heal themselves, the world's central banks have polluted markets with flawed economic theories and trillions of dollars of debt. Rather than ignite economic growth as they had hoped, however, they have suffocated the global economy.
Stock market predictions
Stock Market Predictions
Stock market predictions – like when a market might pull back or if it's a good time to buy stocks – sound like a great idea. Who doesn't want to know what's in store for their money or if there will be a stock market crash in 2022? But these forecasts, even from experts, can vary widely. How are both short- and long-term stock market forecasts made, where does the information come from, and what information should investors look at?
Leading Economic Indicators
Leading economic indicators can tell you where an economy is headed and provide information so that investors can make stock predictions. A leading indicator shows economic improvement or decline before the economy shows it.
These indicators include:
• Stock prices
• Average Earnings
• Consumer Spending
• Unemployment Claims
• Building Permits
• Product Inventory
Leading economic indicators tell investors whether an economy is expanding or contracting. For example, if unemployment claims are down and earnings are up, then it’s likely the economy is expanding.
Leading economic indicators also influence the actions of central banks. These banks may implement easing or lower interest rates if an economy is lagging. Interest rates, as they effect the cost of borrowing money, effect the economy.
These statistics and the policies which impact them tend to change before the economy changes. Experts can use these statistics to make stock market predictions.
Just as leading economic indicators predict and reflect economic conditions, market indexes also predict and reflect economic conditions. Understanding the trends of these indexes can help experts forecast the stock market and estimate the future price of shares.
Looking at market indexes both in the short- and long-term can provide investors with information about momentum and mean reversion.
Momentum is the assumption that the market—or a particular share—will continue in the same direction that it’s going.
Mean reversion is the idea that the market will even out over time. Mean reversion may happen over many years or decades, and can be hard to observe at a given moment.
Over the short term, or 3–12 months, momentum provides some information for investors: stocks that are going up are likely to continue to go up. However, over the long term, or 3–5 years, stocks that have gone up are likely to underperform, or revert to the mean.
Martingales are another way to approach how market indexes might help predict future stock prices.
Martingales refer to the idea that past pricing trends have no effect on future prices, and that the best predictor of tomorrow’s market price is the current price plus a small amount. The inputs for martingales are stock-specific, and include the current price and the estimated volatility.
Martingales are about tomorrow’s price, momentum is about short-term trends, and mean reversion is about long-term trends. By following stock market indexes and by using one—or all three—of these methods, an expert can make a more accurate stock market prediction.
Value investors don’t believe that share prices reflect all information available or that shares necessarily trade at their fair value. These investors forecast the stock market by including information outside of the market itself.
Value investors look for stocks priced less than their book value. Value investors believe that the market reacts to good and bad news, and that stock market prices might not reflect the intrinsic value, or valuation, of a stock. These investors look to purchase undervalued stock to buy at a discount, hold long-term, and sell later at a profit.
Examining a company’s financial performance, including their revenue, earnings, cash flow, and profit as well as their business model and market can all help an investor determine the valuation of a stock. Looking at a company’s earnings reports over time can also help investors analyze a firm’s financial health.
With this information, an investor can calculate the price-to-book ratio (P/B). This ratio compares the stock price with the value of the company’s assets.
Value investors look for stocks with a below average P/B ratio. Investors purchase these stocks when they can predict that the share price will rise to a more average position.
Predicting the Stock Market
To predict the stock market, understanding the health of the economy, as well as the policies surrounding that economy, are key. Examining your goals as an investor—such as knowing your time-frame and risk tolerance—will help you choose the right information to look at.
Additionally, unusual economic circumstances can make variations in stock profitability wider and much more obvious, and these variations can help investors observe trends and make long-term stock market forecasts.
Check out our free report "Protect Your Money from a Market Crash in Two Steps". This comprehensive guide covers everything you need to know to make it through a market crash.
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The Dow Jones Industrial Average, Nasdaq, and S&P 500 each trade near all-time highs as we approach Q3 2015. It's been one of the longest bull runs in years.
Now, many stock market predictions from Wall Street pundits call for a correction as early as Q3 2015.
Money Morning Technical Trading Specialist D.R. Barton, Jr., joined CNBC Asia last night (Thursday) and gave his stock market predictions for Q3. He also told investors the best strategy for investing in this volatile market as we enter the summer months...
There are more warnings of a stock market correction circulating now - especially since the Nasdaq and S&P 500 both reached closing record highs Friday.
The Nasdaq Composite closed at a record high on Friday at 5,092.08. That was the first time the index had set a record in more than 15 years. The S&P 500 closed the week at 2,117.69. The Nasdaq and S&P 500 have now climbed 7.7% and 3% respectively in 2015.
At the same time, more than $79 billion has left U.S. stock funds this year.
Trusting Wall Street stock market predictions could be hazardous to your portfolio's health.
In particular, the annual Wall Street stock market predictions made by the top analysts are so inaccurate, a blindfolded monkey with a dartboard could do better.
Collectively, the forecasts of these "experts" over the past 15 years have been off by an average of 14.7 percentage points a year. That's worse than if they'd simply guessed the long-term average return of 9% every year.
Stock market predictions are typically bullish in April. According to The Stock Trader's Almanac, the S&P 500 has climbed every single April since 2006 by an average of 3.1%. Since 1950, it has been the best performing month for the Dow Jones.
This monthly spike is usually attributed to strong Q1 earnings reports hitting Wall Street. Numerous companies will also raise their guidance figures for the full year in April.
This year, things aren't as bullish in the short term. Our stock market predictions today call for continued volatility into Q2.
For the first time since 2008, stocks traded down on the last trading day of the year and the first trading day of the New Year.
Whether this will prove to be a mere statistical curiosity or a harbinger of troubles ahead remains to be seen, but there are enough headwinds facing investors to force them to don foul weather gear for the year ahead.
When it comes to the stock market, it's not the "little dips" that are a concern, Money Morning Capital Wave Strategist Shah Gilani said Tuesday.
What is worrisome are the "black holes," and if and when we'll step into one.
With Goldman Sachs' $100 million loss Tuesday, and the Nasdaq shutting down for hours today, looks like we're already there...
It's one of the biggest mysteries in finance right now. I mean, it's a real head-scratcher...
On one hand, demand for silver coins is off the charts. In fact, it is so strong even the U.S. Mint is having trouble keeping up with demand.
So how is it possible for silver prices to be falling?
Here’s an insider’s take on this conundrum...
He confided to me that many of his clients had been asking for gold and gold-related investments over the past few years. I can't say that I was surprised.
But what he told me next simply shocked me.
"Gold's much too volatile, it's too risky", he said. "Sure it's up, but I try to discourage my clients from investing in it."
It simply floored me that he thought gold was too volatile. Gold is only up 580% since it bottomed in 2001, without a single losing year to date.
That's not something you can say about the stock market or any other type of investment.
I can hardly imagine what he must think of silver, as silver prices are up by 725% since 2001.
Today, silver is trading around $34, but our 2013 silver price forecast now has the shiny metal going much, much higher.
What will power that rise?
Since it's slaved to its richer cousin, all the fundamentals for higher gold would apply.
I wrote about them yesterday in my 2013 gold price forecast.
As history has shown, silver moves almost in sync with gold, but exaggerates its movements, both on the up and down sides. That's why I like to think of silver as "gold on steroids".
During the last secular gold bull market in the 1970s, gold rose from $35 in 1968 all the way to $200 by late 1974.
Then the unthinkable happened. Between late 1974 and mid-1976, gold prices were cut in half, dropping from about $200 to $100.
At the time, many gold investors sold out in disgust, never to return.
But then a funny thing occurred. Gold prices started to climb again, rising from $100 in mid-1976 all the way to $800 by January 1980.
And anyone who was fortunate enough to own gold at $35 earned better than 20 times their investment in just 12 years.
Twenty-one years later, a new bull market began. Since 2001, gold has consistently performed in what now appears to be a record-setting run.
In fact, since 2001 the average return on gold is now just shy of 18% annually over the last 11 years.
I know of no other major asset that has turned in this kind of performance -- ever. This rise in gold prices is simply unmatched.
This is what a stealth bull market looks like, one that I fully expect will keep powering on.
Now, let's have a look at where gold prices might be headed in 2013...
There's only one problem with this scary story: It isn't true.
Of course, I'll be the first one to tell you I'm not in favor of higher taxes on dividends.
And it is true that if we fall off the "fiscal cliff" taxes on dividends will revert to the full income tax rate of each individual taxpayer.
For the top taxpayers that means the top rate on dividends will rise from 15% to 43.4% if dividends become fully taxable again.
However, that's not as bad as it sounds, which is why I believe dividend stocks will remain the place to be in 2013.
First institutional holders of dividend stocks are taxed at their own rate so they did not benefit from the 2003 cut in dividend taxes. That means they won't suffer from a new increase.
And even among individual investors, many have their investments in IRAs or 401(k )s or other tax- deferred accounts. These holders will continue to receive dividends that won't be immediately taxed.
As for those on more modest incomes, perhaps being retired and living mostly on their dividend income, they will pay taxes only at 15%, 25% or 28%.
These are the thresholds which have been indexed for inflation since 2001, meaning the vast majority of tax payers will never get close to the 43.4% figure that makes for great scary headlines.
But it's not just all about tax rates. There are other reasons why savvy investors should continue to invest in dividend stocks in 2013.
One of them is Barack Obama...
Believe it or not the world doesn't revolve around the United States-or the Western world.
Sure, gold remains the favorite of most precious metal investors, but THIS is the metal you really want to double down on right now. Three catalysts will propel the price much, much higher over the coming months and years.