NEW YORK (TheStreet) -- The major equity averages will begin 2015 with upside potential of 9.5% to 10% for the Dow Jones Industrial Average, S&P 500 and Nasdaq 100.
If this upside doesn't occur in the first quarter, the odds of having a positive year for U.S. stocks are a flip of the coin.
The backdrop for this vision in today's crystal ball is just how patient the Federal Reserve will be in beginning a normalization of monetary policy.
The consensus is that its Federal Open Market Committee will begin with its April 28-29 meeting or its June 16-17 meeting. The latter is followed by a press conference by Fed Chief Janet Yellen.
At some point, continuing to wait for normalization for a "considerable time" will mean that more companies are having difficulty in keeping their earnings momentum intact. This sets up the downside risk for the major equity averages.
Assuming that 2014 closes are little changed from Monday's closes, the major averages will see downside between 18% and 25% at some point next year.
U.S. Treasury yields will remain stubbornly low as the coupon curve continues to flatten.
The yield on the two-year will rise in anticipation of eventually normalization of Fed policy and as longer-term yields stay low.
The yield on the U.S. 10-year could trade as low as 1.75%, given that the German 10-year is at 0.60% and the Japanese 10-year is at 0.35%.
The U.S. 30-year bond yield should be range-bound between 3.25% and 2.50%.