Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
Support MFO
Donate through PayPal
Optimistic Article on S&P500...up 14% by years end...be careful what others wish for
The benchmark index for U.S. stocks will climb 14 percent from yesterday to end 2011 at 1,300, according to the average estimate of 12 strategists surveyed by Bloomberg. The last time they were this bullish in October was 2008, when the group predicted a 27 percent gain and the index lost 18 percent...be careful out there:
Analysts are always bullish and if not they're flat. Buffett's "Buy American...I Am" call was also in 10/08, I believe. I don't think the market is going way lower, but if it's whipped around by rumors of fixes long enough without a satisfactory fix (and I don't think there's a satisfactory LONG term fix that's going to make the markets happy - eventually reality will have to be dealt with here and in Europe, but the can has been kicked this far, it can probably be kicked further than anyone would think - it just makes the end result worse), I think there could be a larger move down. Over the next decade, I think there's some serious structural issues with this country that need to be addressed before the market could even think about really heading back up towards '07-08 highs, and that's going to be difficult and turbulent. Or Bernanke just goes for QE3.
I do think the year could end in this neighborhood or a little lower, but I don't think the DOW goes under 10,000 this year. I *do* believe that the volatility will remain, and I do continue to recommend a bit of allocation to flexible alternative strategies such as managed futures.
Reply to @Shostakovich: I don't think anything would really surprise me at this point, but I guess if you continue to see the kind of short (and shorter) term mentality regarding investing continue and you continue to see more retail leave the market (whether older generations taking money out of the market or other factors), then I could see the volatility continue, but I think the longer it lasts (and especially if it gets worse), it'll have really negative effects on investor psychology and other aspects of the market. Daytraders will likely find it wonderful, everyone else not so much.
I think there may be an increasing amount of flexible/alternative strategies for the retail investor, but they'll continue to be a mixed bag. Hedge funds aren't necessarily the answer, either - many of them have not fared well in this market, or have not fared any better than many mutual funds that haven't fared well, either. High volatility for the next 10 years would be bad/major, but at the very least, I think investing will become more difficult. I think investors are going to have to be more flexible, more nimble and integrate additional strategies. I think you're going to see alternative strategies becoming more popular and new funds in this area start to pop up in increasing numbers again.
They'll continue to be a bit of a mixed bag, but there will likely be some highlights and the strategies will seem "latest generation" - for example, Rydex Managed Futures was praised as bringing Managed Futures to retail, but it was a pretty basic managed futures strategy. Then you had a more complex managed futures fund from AQR and now you have managed futures funds that farm out to hedge funds running multiple managed futures strategies. Those funds do have high fees, but I think you'll see that come down a bit, possibly as there becomes more of these sort of funds. Now you're seeing Global Macro fund-of-funds, with Altegris Macro Strategy (MCRAX), which is farmed to global macro hedge funds.
I don't think these funds will come quickly (although that will change if the market remains like this), nor will they all be good, but I am encouraged that investors will hopefully have a larger set of tools to work with in upcoming years.
Comments
I do think the year could end in this neighborhood or a little lower, but I don't think the DOW goes under 10,000 this year. I *do* believe that the volatility will remain, and I do continue to recommend a bit of allocation to flexible alternative strategies such as managed futures.
I think there may be an increasing amount of flexible/alternative strategies for the retail investor, but they'll continue to be a mixed bag. Hedge funds aren't necessarily the answer, either - many of them have not fared well in this market, or have not fared any better than many mutual funds that haven't fared well, either. High volatility for the next 10 years would be bad/major, but at the very least, I think investing will become more difficult. I think investors are going to have to be more flexible, more nimble and integrate additional strategies. I think you're going to see alternative strategies becoming more popular and new funds in this area start to pop up in increasing numbers again.
They'll continue to be a bit of a mixed bag, but there will likely be some highlights and the strategies will seem "latest generation" - for example, Rydex Managed Futures was praised as bringing Managed Futures to retail, but it was a pretty basic managed futures strategy. Then you had a more complex managed futures fund from AQR and now you have managed futures funds that farm out to hedge funds running multiple managed futures strategies. Those funds do have high fees, but I think you'll see that come down a bit, possibly as there becomes more of these sort of funds. Now you're seeing Global Macro fund-of-funds, with Altegris Macro Strategy (MCRAX), which is farmed to global macro hedge funds.
http://www.altegrismutualfunds.com/fund/globalmacro/portfolioholdings.aspx
I don't think these funds will come quickly (although that will change if the market remains like this), nor will they all be good, but I am encouraged that investors will hopefully have a larger set of tools to work with in upcoming years.