By Summer's End, Stocks Reach New Highs?

Mark Hulbert MarketWatch March 19, 2012

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March 16, 2012, 12:01 a.m. EDT

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By Mark Hulbert, MarketWatch

CHAPEL HILL, N.C. (MarketWatch) "” The stock market could be trading at new all-time highs by the end of this summer.

Have a hard timing accepting that possibility?

Well, consider this: That rosy forecast comes from none other than Sam Eisenstadt, the former research director at Value Line, Inc. When I last reported on his stock market outlook, in mid December, he was projecting a 10% rise over the subsequent six months. ( Read my Dec. 16 column, entitled "Market will be 10% higher in six months." )

/quotes/zigman/3870025 SPX 1,404.17, +1.57, +0.11%

Though that column elicited a lot of incredulity at the time, in retrospect we can see that his forecast was too conservative (though I doubt anyone who invested on Eisenstadt's forecast is complaining). And he today is projecting that the S&P 500 /quotes/zigman/3870025 SPX +0.11% by the end of August will be trading around 1,520 "” 8.4% higher than where it stands now.

Though the S&P 500 at 1,520 would still be below its all-time high of 1,565 set in October 2007, an 8.4% rise would be enough to take the Dow Jones Industrial Average /quotes/zigman/627449 DJIA -0.15% to around 14,360 "” which would exceed its October 2007 high by a couple of hundred points.

Why listen to Eisenstadt?

Prior to his retirement in late 2009, Eisenstadt had spent 63 years at that firm. At the time of his retirement, 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.

Eisenstadt in retirement continues to update and refine a complex econometric model that forecasts where the market will be in six months' time. The inputs to his model are monthly readings of numerous economic and financial variables over the last six decades "” back to 1952, in fact.

I've reported in these pages before on the forecasts made by Eisenstadt's model and, though by no means have they always been on target, they have been good enough to justify our paying attention to what his model is forecasting now.

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Stocks rise, pushing the Standard & Poor's 500 index above 1,400 for the first time in almost four years, after another round of solid domestic economic reports. Photo: Reuters

For example, in December 2009, Eisenstadt forecasted a 20% return for calendar 2010. The Wilshire 5000 actually came remarkably close, gaining 17.2% for the year, after dividends. ( Read Eisenstadt's column for MarketWatch in December 2009. )

One year later, in December 2010, Eisenstadt's model was forecasting a double-digit gain for the market in the first half of 2011, which translated into the S&P 500 rising to the 1,360 area and the Dow to around 13,000.

Again, this has to be graded as remarkably accurate. At the market's high late last April, the S&P 500 was trading at 1,371, slightly above his forecast from five months earlier, and the Dow was at 12,876, slightly below. ( Read my Dec. 2, 2010, column about Eisenstadt's prediction. )

In contrast, Eisenstadt's model for the latter half of 2011 was too bullish. Mid-year, for example, it was forecasting a 5.7% return through the end of the year. In fact, of course, the market ended the year well below its mid-year level "” about 4.8% below, in the case of the S&P 500.

Though its failure in the latter half of 2011 is discouraging, it is not in itself a reason to give up on the model. No model is perfect, after all. But Eisenstadt reports that his model's track record "” warts and all "” has been statistically quite significant.

The bulls can only hope that it is as close to being as accurate in coming months has it has been in recent years.

Click here to learn more about the Hulbert Financial Digest.

/quotes/zigman/3870025 Add to portfolio SPX S&P 500 Index 1,404.17 +1.57 +0.11% Volume: 1.34B March 16, 2012 4:33p var embeddedchart124732823Chart = new EmbeddedChart('#embeddedchart124732823', NormalChartStyleNoDecimals, 240, 80, '1dy', '5mi', null, null, null, 'US:SPX'); jQuery.data($('#embeddedchart124732823').get(0), 'embeddedchart', embeddedchart124732823Chart); /quotes/zigman/627449 Add to portfolio DJIA Dow Jones Industrial Average 13,232.62 -20.14 -0.15% Volume: 392.62M March 16, 2012 4:30p var embeddedchart70394702Chart = new EmbeddedChart('#embeddedchart70394702', NormalChartStyleNoDecimals, 240, 80, '1dy', '5mi', null, null, null, 'US:DJIA'); jQuery.data($('#embeddedchart70394702').get(0), 'embeddedchart', embeddedchart70394702Chart); //$(document).ready(function() { var storywidth = $('#mainstory').width(); var maxwidth = storywidth; $('#maincontent pre').each(function (index, value) { var thiswidth = $(value).width(); if (thiswidth > maxwidth) maxwidth = thiswidth; }); var offset = maxwidth - storywidth; if (offset > 0) { var margin = 13; var blanketwidth = $('#blanket').width(); var contentwidth = $('#maincontent').width(); $('#blanket').width(blanketwidth + offset + margin); $('#maincontent').width(contentwidth + offset + margin); $('#mainstory').width(storywidth + offset + margin); } //});

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.

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Mark Hulbert is editor of the Hulbert Financial Digest, which since 1980 has been tracking the performance of hundreds of investment advisors. The HFD... Expand

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. Collapse

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