Long-Term Stock Market Forecast
The Investment U E-Letter: Issue # 438
Thursday, May 19, 2005
Long-Term Stock Market Forecast: What Can We Expect in the Next Three to Five Years?
By Dr. Steve Sjuggerud, Chairman, Investment U
Let’s get to the point today…
| There’s no sense in watching the day-to-day fluctuations in the market. What matters is the long-term stock market forecast-specifically the next three to five years not the next three to five weeks.And there’s no sense in wasting your time listening to analyst after analyst who, quite frankly, probably has less money invested than you do.
What we’re doing today is simple. We’re cutting to the heart of what matters. We’re only looking out over the long term. And we’re only doing it with people who have forecasted the stock market successfully for decades. Lastly, we only want their opinion on what they’re good at. |
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So let’s get started by looking at what five experts have to say about the long-term stock market forecast
1. Warren Buffett on the Stock Market: HE’S NOT FINDING GOOD BUYS
Warren Buffett has run Berkshire Hathaway with fantastic success for more than four decades. It’s now a $130 billion company.
In his most recent annual letter to shareholders, Buffett said he’s “found very few attractive securities to buy.” Therefore he ended 2004 with “$43 billion of cash equivalents” (from http://www.berkshirehathaway.com).
If Warren Buffett doesn’t think he can make any money in the stock market, then how can the Regular Joe possibly expect to get rich in the stock market in the coming years?
2. Bill Gross on Bonds: HE’S BULLISH
Bill Gross, as head of bonds at PIMCO, is responsible for a half-trillion dollars in bond assets. That has to make him the world’s biggest money manager.
“If we had to forecast we believe a range of 3 - 4.5% for 10-year Treasuries will prevail during most of [the next three to five years] and that yields on Euroland bonds will be slightly lower” (from http://www.pimco.com).
If Bill is right, and bond yields go lower, then bond prices would actually go higher. You’d earn the 4% interest, PLUS a capital gain. A total return of 8% a year may not be something you tell your grandkids about. But Bill Gross is optimistic on the bond market.
3. Martin Fridson on High-Yield Bonds: HE’S BEARISH
Martin Fridson literally wrote the book on securities and credit analysis. And in 2000, Fridson became the youngest person ever inducted into the Fixed Income Analysts Society Hall of Fame. He is a superstar analyst. He was just interviewed in Barron’s about his specialty - high yield bonds. He said:
“The outlook is for further deterioration in conditions. We reached a low point in spreads and the smallest risk premium earlier this year. The trend in the default rate over the next couple of years will very likely be higher, perhaps considerably higher.”
Marty does great homework. Learn more about him at http://www.martinfridson.com.
4. Richard Russell on Bubbles: WATCH OUT IN REAL ESTATE
Richard Russell has written his newsletter, Dow Theory Letters, since 1958. With nearly a half-century’s worth of writing about the markets under his belt, he’s seen his share of bubbles come and go.
Right now, Richard Russell is saying: “Real estate today is where tech was in the year 2000″ (http://www.dowtheoryletters.com).
After what I’ve seen here in Florida, I agree with him that we’re near the end of the big run in real estate.
5. Jeremy Grantham on Where to Diversify Your Assets: TIME FOR TIMBER
Jeremy Grantham (http://www.gmo.com) has over three decades of Wall Street experience, and is a legendary money manager, known for his intelligent asset allocation. Where’s an attractive place to allocate money for the long run?
As far as the stock market goes, timber is “cheaper than anything else because there is nothing in the world that is fairly priced,” Grantham told Barron’s. “It is a wonderful diversifier. It is the only commodity that has had a rising real price over the last 100 years, and certainly in the last 20 years It is a mispriced asset class, it is still too cheap, and there are quite a few good decades ahead of it.”
That’s it. The long-term stock market forecast, short and sweet today, from the best and biggest in the business
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Today’s IU Cribsheet
- For more on the timber market story, check out IU E-Letter #316 - Investing Legend Jeremy Grantham: Money that Grows on Trees Also, The Oxford Club, whose advisory panel I serve on, currently has buy recommendations on several great timber stocks. You can find out more on the Club’s latest opportunity here.
Good investing,
Steve
Related Articles:
- Investing in 2005: Biotech Stock Predictions, Gold Coin Investments, and Hot Energy Stocks
- U.S. Dollar Forecast: “Still Room for a 20% Rise In the Buck”
- Stock Market Predictions for 2004-2005: The Best Stock for the Next 10 Years
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