In writing this essay last year, I pretty well bet the farm that the power of the Presidential Election Cycle would make 2007 a "very good, but not spectacular" year for the stock market. Well, 2007 definitely was not a spectacular year for stock prices and there's some doubt that it was even very good. It wasn't as good as I had hoped for, but it still gave us a lot of opportunities to make good profits and that's what really counts. So what about 2008?

In a nutshell, I don't think 2008 is going to be all that good for stock prices. The market has been acting tired for several months now and the general perception is that the economy and earnings growth are slowing down. Worse yet, the fear of inflation is increasing and investors don't believe that Dr. Bernanke is lowering interest rates fast enough to prevent a recession. Now I know these perceptions may not necessarily be true, but where's the spark going to come from to push stock prices higher?

Even though 2008 is the fourth year of the election cycle and fourth years have been very good years for stock prices, I'm not expecting much for next year. President Bush is a lame duck president and has very little ability to influence much of anything in a positive way. So how bad will the stock market get in 2008?

Well, I don't think it's going to be that bad. For one thing, the economy is still growing, albeit at a slower pace. And earnings are still going higher year-over-year. This is the key. The market is going to remain in a bullish scenario as long as earnings are going up. If stock prices go down while earnings are going up, there will be more bargains to feast upon. These feasts will spark the rallies needed to push the market higher. So I'm not worried if the market's not going to be so hot in 2008. I'm prepared to go bargain hunting in The Year Ahead.

SMOOTH COMFORT.
Stocks with high Comfort Index (CI) ratings have the best looking chart patterns in our database. One wonders how these stocks can just keep going higher and higher. Invariably, they are driven by powerful earnings performance. Mr. John Campbell will show us how to turn this performance into profits in this week's "Strategy of the Week." Visit the VectorVest University to see John's presentation on "Smooth Comfort."