Capital Economics also believes that pressure from U.S. corporate and political structures, along with weakness in Europe will leave markets little changed by end of the year.
Meanwhile, most economists expect the U.S. economy to expand 2% or worse this year.
On the other hand, market bulls are pointing to the increased interest in riskier equities. [Stock ETFs Rally as Investors Return to Risky Assets]
“A long-term rotation from bonds to stocks is likely to begin sometime this year, but those claiming that it is already underway are premature and may be in for disappointment if they expect the stock market rally to continue each week in the months ahead,” Jeff Kleintop, chief market strategist at LPL Financial, said in the CNBC article.
J.C. Parets at All Star Charts has an in-depth look at the January Barometer. “When the month of January records a gain, as measured by the S&P500 Index, history suggests that the rest of the year will serve as a benefactor, and finish in the black as well. Since 1950, this indicator has an incredible 88.7% accuracy ratio,” he writes. “Unfortunately, history doesn’t speak too favorably for February in terms of seasonality, especially in post-election years.”
- SPDR S&P 500 (NYSEArca: SPY): up 5.1% over the past month
- SPDR Dow Jonew Industrial Average (NYSEArca: DIA): up 6.1% over the past month
- PowerShares QQQ (NasdaqGM: QQQ): up 2.7% over the past month
For more information on the broad markets, visit our S&P 500 category.
Max Chen contributed to this article.
Full disclosure: Tom Lydon’s clients own SPY and QQQ.