Have the forecasters got it right?

Markets in 2004: Have the forecasters got it right - at Moneyweek.co.uk - the best of the week's international financial media.

"The third time was a charm," says Michael Santoli in Barron's. Having taken a bullish stance in 2001 and 2002 based on hopes of economic and profits recovery in the second half of the year, the same bet finally paid off for forecasters in 2003 as Wall Street rebounded from a three-year losing streak. The S&P 500 and Dow Jones indices rose by 26% and 25% respectively and the Nasdaq index by 50%. And strategists expect to see "a little more in 2004". The majority expect an advance of 3-15% by the S&P as GDP and earnings growth, despite decelerating, continue to bolster stocks.

So will the consensus view defy the odds and be proved right for a second successive year? It's certainly "hard to see what might prevent the market from retaining its upside bias" in the short term. Investors "are happy to extrapolate improving economic data into a continuing upward arc", and chartists note that the technical outlook remains auspicious. Moreover, there is still scope for "fresh cash" to bolster the market from retail investors who have missed out on recent gains. Indeed, the recent uptick in stock-fund inflows shows that this process is already underway.

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