The Financial Times' Investment Editor argues this week that "there is no point in forecasting stock market performance to the last digit".
Instead it presents 3 scenarios for 2010:
• Standard Bear Market. This view suggests that the current rally is "the normal adjustment after a market crash". After the rally ends, we will then see "a decade of trading in a range", with money to be made "by traders rather than long-term investors".
• Great Panic. This suggests 2007-9 was merely a "panic". Now "the risk of disaster" has gone, there is a "buying opportunity" for investors, and "profit opportunities for companies, as they can cut costs more easily".
• Second Great Bust. The downside fear is that whilst "cheap government money rescued markets" last year, this caused a "credit bubble" in China, and meant "the US put its credit rating on the line". The likely "next event will be a market disaster", taking us below 2009's lows.
The FT has sympathy with all 3 scenarios, but suggests the odds favour the Bear Market view at 60 - 70%. It gives a 10 - 20% probability to the upside and downside views.
It says its prefered measures of stock market value, Tobin's Q and the cyclically adjusted price/earnings ratio, both show markets are now overvalued. The FT therefore concludes that "it is still a very risky world".