Kevin McCormally: I am Kevin McCormally of Kiplinger's, and I am here with Manny Schiffres, the chief investment editor of Kiplinger's Personal Finance magazine. Manny, what is Kiplinger's expect from the stock market for 2006?
Manny Schiffres: Kevin Kiplinger's expects to grow stock market to return about 7 or 8%, in 2006, that would be a little bit more than the 5% return of the Standard & Poor's 500 Index in 2005, but a little bit below the historical average of about 10% a year.
Kevin McCormally: What goes into your prediction, why 7 or 8%?
Manny Schiffres: Well, we expect below average returns ,because there are two negatives on the horizon. One is that the Federal Reserve Board is likely to continue raising short-term interest rates, probably for the middle of the year, that's a negative for stocks. The other negative is that we expect a deceleration in earnings growth. That doesn't mean that earnings will fall, it just means that there won't be rising as much as they have in the past few years.
Kevin McCormally: Okay. First I ask you why you don't expect more after that gloomy assessment. Tell me why do you expect there's good return of 7 or 8%?
Manny Schiffres: Well, there are a few things that are likely to hold up stock prices. One, stocks are relatively fairly valued, interest rates remain low, and we don't expect recession, inflation is under control. You have a number of things that are positive that should keep stock prices off.
Kevin McCormally: What about what's going on with real estate, do you expect, does real estate decelerates people be more interested in stocks?
Manny Schiffres: Well, real estate has been a huge, say for money the last few years and if real estate starts falling, sure people will look at the stock market as an alternative a better alternative investment.
Kevin McCormally: Manny, what does Kiplinger's expect to be the best investments of 2006?
Manny Schiffres: In the domestic stock market, we would expect the stocks of fast, large growing companies to be the best part of the stock market, and for most people the best way of doing that is to invest in the mutual fund, maybe even an index fund that concentrates on that area of the stock market, and we think foreign stocks will do well in 2006, could be the best performing area of all.
Kevin McCormally: Okay, thank you very much Manny.
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