Restrained Rally Slowly Emerging
All of the above confirm my expectations that the markets can grind higher for the rest of the year.
Still, my expectations for a rally are modest, i.e. a 10% move for the Nasdaq 100. The S&P 500 could run as far as the 1280-90 area. With a bit of luck, the Dow Jones Industrial Average could even see 11,400.
Beyond New Year's Eve, I become increasingly bearish. I don't see a collapse, but rather a lack of lift in the first quarter. I don't expect the serious trouble until later in 2006.But for now, there is a year-end rally in the offing. Enjoy it while it lasts.
Parting ThoughtsThere's an old saying: I cannot hear what you are saying, because what you are doing is speaking so loudly. That's my take on the Federal Reserve: If it really believes inflation is so "contained" and "transitory," then why is it hell-bent on tightening rates for the rest of our natural lives or until the next recession, whichever comes first? The answer, in case you haven't been paying attention, is the robust inflation coursing everywhere through our economy, save for wages and personal income. Indeed, real wages are actually down 2.3% for the third quarter. Total compensation costs (wages paid plus benefits) are down 1.5% on an inflation-adjusted basis. That does not bode well for consumer spending into 2006. This comes when the consumer is running increasingly low on dry powder. As we noted previously, the consumer is nearly -- but not quite -- shopped out. Meanwhile, actual growth -- and not the estimated, preliminary Commerce Department's GDP data -- remains modest. This helps explain why my bullish posture is short term in nature, and measured at that. P.S. from TheStreet.com Editor-in-Chief, Dave Morrow:
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