What explanatory variables should be looked out when forecasting the DOW for the next 6 months?

Question

Yeah, I understand it's difficult, but factors such as expected economic growth, inflation rates, and economic indicators can be used to help forecast for the DOW...I was just wondering if anyone had any tips...

Answer 1

None. Market indexes are notoriously difficult to forecast, especially on a six-month horizon.

On a shorter time horizon (days), you could look for clues in the options market, on a longer time horizon (years), in the Bostian model of the Fed model... But six months is a time frame that is too long for speculation and too short for the fundamentals to kick in.

Answer 2

I don't think so either. Just look at today's DOW if you want to know tomorrows. I think it is safe to say there is no evidence that there is any model that predicts the DOW reliably. You could always accidentally stumble upon something that predicts something out of sample for a limited period of time. But that model won't do better than assuming today's value is the same as the next period.

Or maybe I am just a cynical bastard, but that is what I have been told.