As of 05/24/2024
  Indus: 39,070 +4.33 +0.0%  
  Trans: 15,083 +74.08 +0.5%  
  Utils: 926 +1.92 +0.2%  
  Nasdaq: 16,921 +184.76 +1.1%  
  S&P 500: 5,305 +36.88 +0.7%  
YTD
 +3.7%  
-5.1%  
 +5.0%  
 +12.7%  
 +11.2%  
  Targets    Overview: 05/13/2024  
  Up arrow41,000 or 38,500 by 06/01/2024
  Up arrow16,050 or 15,300 by 06/01/2024
  Up arrow960 or 900 by 06/01/2024
  Up arrow17,250 or 15,850 by 06/01/2024
  Up arrow5,500 or 5,100 by 06/01/2024
As of 05/24/2024
  Indus: 39,070 +4.33 +0.0%  
  Trans: 15,083 +74.08 +0.5%  
  Utils: 926 +1.92 +0.2%  
  Nasdaq: 16,921 +184.76 +1.1%  
  S&P 500: 5,305 +36.88 +0.7%  
YTD
 +3.7%  
-5.1%  
 +5.0%  
 +12.7%  
 +11.2%  
  Targets    Overview: 05/13/2024  
  Up arrow41,000 or 38,500 by 06/01/2024
  Up arrow16,050 or 15,300 by 06/01/2024
  Up arrow960 or 900 by 06/01/2024
  Up arrow17,250 or 15,850 by 06/01/2024
  Up arrow5,500 or 5,100 by 06/01/2024

Bulkowski's 2021-2025 Stock Market Forecast

Released 1/1/2021.

Forecast: 2021-2025

On some of the charts, the prediction in red is based on the work of Edgar Lawrence Smith in the 1930s. Smith said that the stock market followed a 10-year cycle. Each year tended to repeat the behavior of the year a decade earlier. In other words, if you averaged all years ending in 1 (2011, 2001, 1991 and so on), that would give you a forecast for 2021. For 2022, you'd make a similar average, only use 2012, 2002, 1992, and so on. That's what I did for the market forecast charts which follow.

Captions appear below the pictures in red, so be sure to scroll down far enough to read them.

 

1 / 11
chart pattern

Shown is performance as of year end 2020. The numbering is how they ranked a month ago. Notice how stable sector performance (left list) tends to be. That's why they say, "trade with the trend," and "the trend is your friend." If you're wondering where to put your money, I'll discuss that later, but this list provides a good clue. Stick with what works.

Within each sector are various industries, which the right list shows. For example, within the information technology sector is "technology hardware, storage and peripherals", "Software" and "Semiconductors and Semiconductor Equipment," all of which appear in the industry list. Out of nearly 70 industries, shown are the top ten performing.

Next slide: Portfolio weighting and business cycle.
2 / 11
chart pattern

Fidelity asked two companies to provide their recommendations for weighting the 11 sectors. The left list shows the result of their recommendations.

The middle list shows the sectors which tend to perform well as the economy comes out of a recession. The bottom of the list (energy, health care, and utilities) shows which sectors suffer. The right list shows which sectors outperform/suffer as the economy rounds over at the peak of the business cycle.

The next slide shows market performance and the prediction out to 2031.
3 / 11
chart pattern

The left column of numbers show how the various indices finished 2020. The winner was the Nasdaq with a gain of 44%, surpassing the others by a wide margin. The only loser in the list was the Dow utilities.

Recall from the last slide that utilities underperform during a recession and as the economy recovers from one. They show the worst performance in all columns. However, dividends are not included. If they were included, the utilities would not be in last place in some columns.

The 2021 prediction shows the market going sideways, not making much headway. That makes sense for the Nasdaq because of the large gain. After a strong upward move, stocks will retrace some of those gains. If the prediction is correct, then maybe that's what you'll see this year.

Looking to 2025, the markets are higher than 2020's close, but not by a lot. The exception is the Dow transports which are predicted to be 56% higher than they were at the close of 2020.

The prediction for 2031 (ten years out) is a gain of 166% in the Nasdaq composite. The lagging index is the Dow utilities with a gain of 61% (not including dividends).

The next slide shows the CPI.
4 / 11
chart pattern

The CPI (Chart Pattern Indicator) is a tool which shows when the general market may turn using the theory that few bullish patterns appear near market tops and more appear near market bottoms. The indicator is a ratio of bullish patterns to the total of bullish and bearish patterns, expressed as a percentage.

The indicator is the thin blue line below a chart of the S&P 500 composite, on the daily scale.

Red vertical bars are bearish signals and green bars are bullish ones. The indicator finished the year at 74, which is bullish.

Not highlighted on this chart, but notice that the CPI line is trending lower even as the index is trending higher. That's bearish.

The next chart shows how the Dow utilities are predicted to move this year.
5 / 11
chart pattern

I follow five market indices each day. This is the first, the Dow utilities.

The utilities finished the year at 865 and are predicted to drop to 841, a drop of 3%. Notice how the index peaks in May and then drops. That reminds me of the saying, "Sell in May and go away."

The next chart shows the Dow transports.
6 / 11
chart pattern

The transports go horizontal for most of the year before starting to slide in July to the worst performing month of the year: September. After that, we see a nice rebound to end the year slightly above (by 1%) where it began.

The next chart shows the Dow industrials.
7 / 11
chart pattern

This chart is similar to the Dow utilities when the index peaks in May and drops to the September low, followed by a rebound. The industrials are predicted to be 2% higher this year than last.

If you want to buy the dip, then September is often a good time to do so.

The next chart shows the Nasdaq composite.
8 / 11
chart pattern

If this chart is correct, the composite will struggle this year. It'll be down 3% from 2020.

The next chart shows the S&P 500 index.
9 / 11
chart pattern

The index drops 1% for the year, based on this prediction. Price peaks in May, drops to September, and the retraces.

The next chart shows the Dow industrials going out to 2025.
10 / 11
chart pattern

This is a prediction of the Dow industrials going to 2025 (weekly). Price peaks this year in May, drops to September, and the rises to March 2022. Weakness takes the industrials down until July before a robust recovery takes the index much higher, to close the period 30% above the 2020 close.

Notice how 2024 is mostly flat until the last 2 months.

The next chart shows the 10-year prediction for the Nasdaq.
11 / 11
chart pattern

This is a chart of the Nasdaq composite on the monthly scale. Over the period, the composite will end the period 166% higher than in 2020, but only if the prediction is correct.

Of the five indices I follow, this shows the biggest gain over the 10-year period.

The end.

See Also

 
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