Guesstimating the Markets {Part IV}

Today is the 3rd scenario I'll offer up on what I think could happen during the rest of 2012. I'll offer this with the same caveats I used in the preceding posts:

1. These scenarios are based on what we know today. An unexpected event could throw this whole exercise down the drain.

2. Markets will become slaves to the election in November the closer we get to that event.

3. Do not go trade or invest based on what you see here! Remember the consigliere's maxim, "markets will do what they have to do to prove the most amount of people wrong"!

4. Treat these scenarios as generalities. I have no way of knowing whether the end points will play out the way I am envisioning here and offer these up as a start point for more specific analysis. As an example just because in the chart above we show stocks topping out in May or June does not mean even if we are right on direction we'll get it correct on time.

Scenario #3 {Please note this is a weekly chart.}

Slower than expected economic growth, persistently high unemployment statistics, fears of a 2013 recession and continued problems in the Euro zone contrive to put a lid on stock prices in May and June leading to a summer decline as the election season approaches.  Markets rebound after the elections and finish 2012 between 1350 and 1425, not far from their April highs.  This scenario places the President's odds of being re-elected at under 50%. 

I assess the probability of this scenario occurring as between 25-30%.  I believe this situation or some variant of it is probably the scenario that most market participants expect to see unfold the rest of 2012.

*Long ETFs related to the S&P 500 in client and personal accounts.