— The next 11 months will be full of surprises and perhaps even more challenging than 2012. This bull market is getting pretty old and nothing goes up forever. Over the past 110 years, except for the unusual decades of the 1920’s and 1990’s, a bear market has come along an average of every 4.4 years. The last one began in December 2007 -- five years ago.
All indications are the next slowdown for the economy and market will likely take place in 2013 or 2014. The current long term bear market, which began in 2000, probably has 4 to 5 years remaining. Within that period, there should be one more recession and cyclical bear market. The catalyst being austerity measures to fight the “macro” problem of record government debt. However, I don’t expect the next cyclical bear market to be as severe as the last one in 2008.
That doesn’t mean there won’t be great opportunities in 2013, but you need to be much more tactical in what you do with your investments. If you are a good trader, 2013 might be a lot of fun. If you’re not, you’ll get whipsawed. With GDP growing at a feeble 2 percent in 2013, and corporate earnings topping out at $105 a share on the S&P 500, those with a traditional "buy and hold" approach to the stock market will do alright provided they are willing to sleep through some gut churning volatility. Here is my forecast for 2013.
1. Stocks will finish higher in 2013, but there will be hard work along the way as a classic “sell in May and go away” pattern happens for the 5th year in a row. We start with a ferocious rally that takes us up to the all-time highs or slightly higher, then a heart stopping summer selloff, followed by an aggressive year-end rally. I would guess we go up 10 percent, then down 20 percent, then up 25 percent to give us an up 10 percent year.