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Location: New York, New York, United States

Saturday, July 29, 2006

Stock market outlook for the rest of 2006

I've taken a defensive position in my 401(k) after today's market rally, as my analysis shows that we're in for rougher times ahead.

A few interesting analyst quotes:

"Technicians have been talking about a four-year cycle low which fairly consistently has occurred every four years, dating back to 1962. The market bottomed out in 2002, 1998, 1994, 1990, and all the way back in 1962, with the only misstep being in 1986. That would imply that we need another market low in 2006. . . Historically, the second year of a president's term in office has been, by far, the weakest. There are 16 quarters in a full four-year presidential cycle, only two have declined on average in the past—the second quarter we just finished and the one we're heading toward (third quarter). Investors should be encouraged by the fact that the best-performing quarter of all 16 quarters [in a presidential cycle] is the fourth quarter of the second year [which is later this year]. The second best is the first quarter of the third year [which is next year]." - Sam Stovall, chief market strategist for Standard & Poor's


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