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DOW 11000 by Summer End !

I returned to USA last week and coming back to my normal life. Tomorrow is official start of Summer and good time to make forward looking predictions for market direction. Last 2-3 weeks, markets have been consolidating between 10K and 10.5 K and almost looking confused about its direction. But now that Euro crisis seems to be understood (but not solved), markets can find some footing and start looking forward to Q2 results.

Now that we are past dreadful May month, there is upward bias in markets and my prediction is that DOW would cross 11000 before summer ends on Sept 21. Here are the reasons for my prediction:
  • Debt crisis of Europe in general and PIIGS in particular seems to be coming under control and doubts of viability of Euro have subsided. This is visible from Euro almost touching $1.24 after touching 4 year lows of $1.18
  • Growth story of emerging countries - in particular of China and India is very much intact. I have personally seen all the excitement in Indian economy during my 4 week stay. India is booming with all new shiny homes getting built. I am sure same is true even more for China. China yielding little-bit on currency would also help
  • US economy is growing albeit lower than what we can call as "robust" recovery - it would grow between 2-3%
  • European growth is still a problem but it could come up with about 1% growth
  • Interest rates across world are remaining low for all of 2010 helping provide boost to risk-taking
So for investments, I am recommending at new REITs like CIM ($3.8), NLY ($18) for their 15-17% yield and RIG ($50), HERO ($3) for potential upside of 50% once BP oil spill saga goes on back-burner.

Have a great Summer !

/Shyam

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