This week's prediction roundup
A random of survey of people looking into their crystal balls...
The Feel-Good Predictions
Brian Wesbury told Tech Ticker that he expects "real (i.e. inflation-adjusted) GDP will be 3.5% in the second half of 2009 and 4.5% in 2010," due to an accommodative Fed, improving credit markets, and "a pending bottom in home building, continued declines in the trade deficit, a return (albeit modest) of consumer spending and improving business inventories."
Mark Perry cites a Fed study that predicts no recession in 2010: "The NY Fed's model uses the spread between 10-year and 3-month Treasury rates (3.54% spread in June, the highest since May 2004) to calculate the probability of a recession in the United States twelve months ahead. The Fed's data show that the recession probability peaked during the October 2007 to April 2008 period at around 35-40%, and has been declining since then in almost every month (see chart above and chart below). For June 2009, the recession probability is only 1.27% and by June 2010 the recession probability is only .06%, the lowest level since May 2005. Further, the Treasury spread has been above 2% for the last 15 months, a pattern consistent with the economic recoveries following the last six recessions."
Scott Grannis says that the price of copper indicates the worst is over: "Copper, long thought by economy-watchers to be the smartest of commodities (thus the nickname "Dr. Copper") is now up 102% from its December lows. Clearly there are some major forces at work out there, one of which is that the world is making considerable progress toward regaining the conditions that prevailed prior to last year's financial crisis."
Charles Lemonides told Tech Ticker thinks Dow 15,000 isn't that far away: "I don't think it would be surprising to see a 12,000 number six months to a year out.... You'll see the market retrace its old high, which means I think that over a couple of years you'll see 15,000 on the Dow."
Warren Buffett tells CNBC that stocks are still a buy despite the recent rally (though he makes clear that this is a long-term call): "I would much rather own equities at 9000 on the Dow than have a long investment in government bonds or a continuously rolling investment in short-term money."
The Economic Cycle Research Institute claims the recovery is almost here: "It is increasingly evident that, despite widespread misgivings based on backward-looking economic data, the end of recession is at hand." They also don't see a double-dip recession.
The Conference Board's index of leading indicators is on the rise: "The Conference Board LEI [Leading Economic Index] for the U.S. increased for the third consecutive month in June.... The six-month change in the index has risen to 2.0 percent (a 4.1 percent annual rate) in the period through June, up substantially from - 3.1 percent (a –6.2 percent annual rate) for the previous six months...."
The Feel-Bad Predictions
Technical analyst Jeffrey deGraaf says stocks will stagnate for years: "The market in my best estimation is probably range-bound between roughly 1,000 on the upside and 700 on the downside, but I would put the risk to the downside."
David Rosenberg doesn't think a long-term bull market is at hand: "We must take into account what the risks are going to be once the buying momentum is lost. Over the near-term, it is obviously prudent to tighten stops and at the same time have a very careful eye on entry levels, but the medium-term and longer-term trends still suggest that we are in cyclical spurt in what remains a secular bear market."
Martin Feldstein thinks we're not out of the woods yet: "There is a real danger this is going to be a double dip and that after six months or so we’ll have some more bad news.... There isn’t going to be enough to sustain a really solid recovery."
Atlanta Fed head Dennis Lockhart expects a limp recovery: "The economy is stabilizing and recovery will begin in the second half. The recovery will be weak compared with historic recoveries from recession. The recovery will be weak because the economy must make structural adjustments before the healthiest possible rate of growth can be achieved."
Nouriel Roubini expects an "ugly" recovery: "We may be out of a freefall for the financial system.... We have seen the worst in that sense. But in my view there is a sluggish U shaped recovery that might go into a W double dip if we don't fix the problems in the economy.... Stay away from risky assets. I think from now on the surprise will be on the downside in areas like commodities."