This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

2005: Gray, With Mild Returns

With 2005 fast approaching, Wall Street analysts are once again gazing into their crystal balls. What they see is a dull but mildly positive year for stocks.

Although strategists are calling for higher interest rates and a weaker pace of earnings growth next year, they believe stocks will inch up as the economy continues to grow at a respectable pace.

The median forecast among the major brokerages is for a 4% increase in the S&P 500, although estimates range from a decline of 4.6% to a gain of 10%.

One of last year's most accurate prognosticators, Tom McManus of Banc of America, is actually among the more bearish pundits this year, saying the market could remain flat or fall slightly over the next 12 months.

"We continue to believe that stocks remain a riskier bet in 2005 than in the recent past," he said. "While both earnings and [price-earnings] multiples have improved from 2002-2003 levels, stocks have significantly outpaced their long-term performance trend."

McManus worries that inflation will escalate next year and that rising interest rates will trigger a "consumer downshift."

While inflation has remained tame in 2004, price pressures are starting to show up at the wholesale level, and some analysts fear that higher consumer prices will follow.

Retailers and auto companies have attracted buyers this year with aggressive discounts and incentives. But some say these offers are unsustainable in light of rising interest rates and high energy costs.

If prices do go up and the Federal Reserve raises rates as much as analysts expect next year, consumer spending could potentially falter, particularly given the low savings rate, high debt levels and lack of fiscal relief. Rates are expected to climb to between 3.25% and 3.5% by the end of 2005 from 2.25% currently.

Good Call
Can Wall Street strategists make it two solid years in a row?
Brokerage Strategist S&P 2004 Target S&P 2005 Target
Goldman Abby Joseph Cohen 1250 1325
Lehman Chip Dickson 1150 1300
Smith Barney Tobias Levkovich 1025 1300
J.P. Morgan Abhijit Chakrabortti 1120 1275
Merrill Lynch Richard Bernstein 890 1250
Prudential Ed Keon N/A* 1250
Morgan Stanley Henry McVey 1200 1250
Bear Stearns Francois Trahan 1100 1200
Banc of America Tom McManus 1160 1200
UBS Gary Gordon 1150 1150
*Ed Keon replaced Ed Yardeni, who had a 2004 target of 1260.
Source: Brokerages

1 of 3

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,985.61 +78.99 0.47%
S&P 500 1,972.83 +9.12 0.46%
NASDAQ 4,419.0340 +27.5710 0.63%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto
Advertising Partners

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs