John Dorfman says the rally will extend into 2010 and the market will make more gains.
The Dow recently regained 10,000, marking a more than 50 percent climb from its March lows.
Dorfman, chairman of Thunderstorm Capital in Boston and a Bloomberg News columnist, wrote that investors should expect equities to continue to rebound.
“I feel fairly confident that the gains will chug along through at least the first quarter of 2010,” writes Dorfman.
“In the past century, there have been 11 violent declines in the stock market, including the 2008-2009 disaster. In nine of the 10 previous cases, the ensuing rally lasted at least a year.”
The rally in the market is mirroring trends historically, he said.
“The historic pattern in rallies associated with economic recoveries is that about 40 percent of the gains occur in the first few months of the rally, while the recession still rages,” he writes.
“About 60 percent of the gains occur during the recovery. The early gains tend to be explosive. After the recovery is under way, gains generally come more slowly, over a one- to two- year period.
Even if stocks move sideways or decline for a short period, they will continue to move higher, Dorfman said.
“So far, I believe that the recovery and bull market are following this historic blueprint. Accordingly, I don’t agree with the school of thought that says the rally is petering out,” he said.
Stocks are recovering because companies are reporting profits, Bloomberg reports.
“The stock market wants to move higher,” said Michael Levine, a money manager at New York-based OppenheimerFunds, which oversees about $165 billion.
“Corporate earnings have been in line or better-than-expected. I see a positive tone through the end of the year.”
By the end of 2009, the S&P could get close to 1,200, said Tom Wirth, senior investment officer at Chemung Canal Trust Co., which manages $1.6 billion, Bloomberg reported.
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