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Mark Hulbert
April 5, 2011, 12:04 a.m. EDT
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By Mark Hulbert, MarketWatch
CHAPEL HILL, N.C. (MarketWatch) "” How many of you late last year were predicting a double-digit percentage gain for the stock market over the next six months?
And of those few of you who were, how many of you in late 2009 were also forecasting a double-digit gain for calendar 2010?
Very few, I can confidently say, at least based on the comments of the investment advisers I monitor"”not to mention the angry emails I received at the time whenever I reported an indicator that was flashing bullish signals.
Sam Eisenstadt, however, is one of the few who can answer "yes" to both of my questions.
Eisenstadt, of course, is the former research director at Value Line who, prior to his retirement in December 2009, had spent 63 years at that firm. Its flagship publication, the Value Line Investment Survey, was in first place for risk-adjusted performance over the three decades the Hulbert Financial Digest had been tracking advisory performance.
In a column for MarketWatch written in December 2009, soon after his retirement, Eisenstadt forecasted that the S&P 500 would rise 20 percent over the subsequent 12 months. ( Read Eisenstadt's Dec. 23, 2009, column.)
Not bad.
And in a follow-up column I wrote a year later"”in early December 2010"”I quoted Eisenstadt as forecasting an 11.9% gain over the subsequent six months. ( Read my Dec. 2, 2010, column.)
Also not bad.
To be sure, the jury is still out on the full six-month period that Eisenstadt was forecasting early last December. But it's already clear that his forecast was impressively on target: Since my Dec. 2 column ran, the Wilshire 5000 Total Market Index (W5000 14,184, +9.21, +0.06%) has produced a dividend-adjusted return of 10.3%.
What is Eisenstadt recommending for the next six months?
Good news: A 9.1% return for the S&P 500 index /quotes/comstock/21z!i1:in\x (SPX 1,333, +0.46, +0.03%) . That translates into an S&P 500 index level around 1,450 on Sep. 30.
On what does Eisenstadt base this cheery forecast? An econometric model whose inputs are monthly readings of numerous economic and financial variables over the last six decades"”back to 1952, in fact. While Eisenstadt stresses that no model is perfect, he reports that his model's forecasts over the last six decades have been statistically significant.
(How significant? Eisenstadt reports that his model has an r-squared of 0.36, which means that it explains 36% of the variation in six-month forecasts over the last six decades. In contrast, I would point out, most of the popular market timing systems on which Wall Street focuses have an r-squared near zero.)
We can only hope that his model is even half as close to being on target over the next six months as was his forecast from last December.
Mark Hulbert is the founder of Hulbert Financial Digest in Annandale, Va. He has been tracking the advice of more than 160 financial newsletters since 1980.
Mark Hulbert is editor of the Hulbert Financial Digest, which since 1980 has been tracking the performance of hundreds of investment advisors. The HFD became a service of MarketWatch in April 2002. In addition to being a Senior Columnist for MarketWatch, Hulbert writes a monthly column for Barron's.com and a column on investment strategies for the Journal of the American Association of Individual Investors. A frequent guest on television and radio shows, you may have seen Hulbert on CNBC, Wall Street Week, or ABC's World News This Morning. Most recently, Dow Jones and MarketWatch launched a new weekly newsletter based on Hulbert's research, entitled Hulbert on Markets: What's Working Now.
Ben Bernanke's much-watched speech avoids the topics of inflation and QE2. Was this a message to his critics?
11:18 p.m. April 4, 2011
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"Mark Hulbert: The market's first quarter, by the numbers http://on.mktw.net/ggrYI7" 6:34 p.m. EDT, March 30, 2011 from MktwHulbert
"Mark Hulbert: Gold market optimism at worrisome levels http://on.mktw.net/flIfBX" 11:54 p.m. EDT, March 28, 2011 from MktwHulbert
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