With corporate profits growing much larger than expected over the past several years, local analysts are excited about the prospects for a big jump in the Dow Jones Industrial Average in 2008, predicting a 15 percent increase in the stock market next year.
"We're bullish on the stock market over the course of the next year," said Sterling Jenson, regional managing director for Wells Capital Management, speaking to the media during a presentation of the Wells Fargo economic forecast and investment outlook for 2008.
"Corporate America continues to perform well and create earnings," he said. "We think earnings will be respectable. (15 percent) is a fluid number, but given our forecasts right now, we think (reaching that growth goal) is very doable."
Jenson said the prediction could change if other parts of the economy behave unexpectedly, such as the jobs sector.
"If we get into a situation where unemployment starts to turn and gets worse and employment gains fall off, that will eventually affect corporate profits," he said.
Jenson said an increase in the unemployment rate and resulting drag on corporate revenues could eventually have a negative impact on the performance of the stock market in the next six months.
He added that with so much uncertainty currently in the national economy especially with fuel prices people are shying away from spending sprees, which doesn't bode well for holiday shopping.
"It's looking like it's going to be a relatively soft Christmas season because people are backing off of discretionary spending a bit and we'll see it impact some retailers more than others," said Jenson.Jenson said he expects the market to decline slightly in the next three months, with stocks beginning to rebound strongly and continue trending upward over the next year.