Commentary: Index could be at 16,000 by year end, Richard Band says

Mar.28, 2008 in Market Outlook, U.S Hot Stocks

ANNANDALE, Va. (MarketWatch) — Richard Band is not someone who makes outlandish predictions just to get headlines.

So I sat up and took notice earlier this week when he wrote to subscribers of his Profitable Investing newsletter that the stock market was ready to “rocket higher” in an “uptrend that could carry the blue chip indexes to all-time highs by late 2008 or early 2009. Dow 16,000 here we come!”

The Hulbert Financial Digest (HFD) has been tracking Band’s newsletter since the beginning of 1991. Over the subsequent 17 years, his recommended portfolio has been 35% less volatile than the overall stock market, as measured by relative volatilities. To use a baseball analogy, this shows that Band is more inclined to try to get a base hit than he is to attempt to belt a home run.

It turns out that, upon risk-adjusting his newsletter’s performance, it equals that of the market itself. That’s good enough to place it in the upper echelon of newsletters over this period, and another reason to give weight to his forecast.
Technical factors appear to have led Band to make such a bold prediction, which amounts to a 33% return for the overall market over the next 12 months.

The first has to do with the stock market’s internal characteristics when it hit a low earlier this month. Band argues that that low possessed “many striking technical resemblances to the great bear market bottoms of the past.”

Financial institutions got us into this mess and they can get us out again. I have no intention of donating my own savings to helping out Wall Street. Wait for the big boys to do the heavy lifting then join in once it looks safer. Individuals trying to get ahead of the curve are likely to be shaken out again.

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