Money manager and Bloomberg columnist John Dorfman — who was ahead of the curve in forecasting the market rebound — says he thinks the rally will continue well into next year.
“I feel fairly confident that the gains will chug along through at least the first quarter of 2010,” writes Dorfman. “In the past century, there have been 11 violent declines in the stock market, including the 2008-2009 disaster. In nine of the 10 previous cases, the ensuing rally lasted at least a year.”
Dorfman also says that he thinks the rally is following historic trends.
“The historic pattern in rallies associated with economic recoveries is that about 40 percent of the gains occur in the first few months of the rally, while the recession still rages,” he writes. “About 60 percent of the gains occur during the recovery. The early gains tend to be explosive. After the recovery is under way, gains generally come more slowly, over a one- to two- year period.
“So far,” Dorfman says, “I believe that the recovery and bull market are following this historic blueprint. Accordingly, I don’t agree with the school of thought that says the rally is petering out.”
Stocks may level off or even drop for a period, but overall they should continue to trend upward, Dorfman concludes.