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What Will the Stock Market Do in 2012? Strategists Predict 7% Rise

Jeff Macke
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With U.S. markets getting cranked up for 2012, pundits have one last chance to make the most pointless of all forecasts: The year-end closing level. If markets are generally difficult to forecast, and they obviously are, speculating where they're going to close 366 days from the start of the (leap) year is pointless, even by the standards of punditry and analysis.

The average forecast is 1,348 on the S&P500; a 7% gain before dividends. In contrast, as a devotee of both predicting the unknowable then wagering on it, I forced my co-host Matt Nesto into an old-fashioned wager on whether to take the over or under on S&P 1,350.

Nesto took the under, mostly because I made him pick a side. Beyond that he finds a total return guess of 1,350 to be the result of lazy, simplistic group-think. The level happens to be resistance from last year's peak, reliant on a continuation of the most obvious and arbitrary trends, even by the standards of all year-end calls. Nesto dismisses the entire exercise, offering that adjusting any of an endless number of variables could push the tape to 1,500 or 1,000 with equal likelihood.

Waffling aside, I'm taking the over, based not on rosy assumptions but as a way of shorting the assorted dangers facing the tape. Here are three things every trading human on earth knows to be true: Europe is bad, China is slowing, the U.S. is hanging in there only because markets are all relative and our nightmares are better than theirs. An unthinkably catastrophic change to any of the prior variables is possible but we live in the now where bad news has been getting priced into the tape since August.

To quote the trader Morrison: "The future's uncertain but the end is always near." Someday a global economic collapse will happen, rendering all that which is traded worthless. But I'll stick with taking the other side of the financial Apocalypse wager every time.

In the event of anarchy, you're welcome to sift through the ruble and say "I told you so."

Which side of the bet are you taking? Let me know @Jeffmacke or in the comment section below.

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