Will the Stock Market Rally Continue?

I just wrote a new story for the magazine, suggesting that we are nearing a bottom for the market. Here’s the top of the story:

Predicting the stock market is a dicey game. Back in October 2008, when the Standard & Poor’s 500-stock index was at 940, I announced on my blog Economics Unbound that I was moving some money back into equities. At the time, I wrote: “Even if the market and the economy keep going down for a while (including today!), this strikes me as a good time to invest.”

After that ill-fated post, the market went into a tailspin, hitting a closing low of 677 on Mar. 9. Stock prices, adjusted for inflation, fell back to 1995 levels, wiping out almost 15 years of gains. Many investors wondered why they even bothered.

But now, with stock prices up 20% since the low, I’m ready to take another shot at calling the bottom. The reasons for muted optimism: better policy, small signs of economic revival, and a sense that we already have absorbed a punch of historic proportions. The downside: stubbornly high unemployment.

I should say that despite my ‘muted optimism’, I’m *not* adjusting my portfolio towards equities at the moment. I have one kid in college and another about to go, so I don’t want to be overly exposed for the next couple of years.

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