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Stephen Leeb: Wall Street Wonder?

| Last Updated: August 2, 2011 | Posted in: Individual Gurus

Guru Accuracy Rating
This is above average. Current guru average is 47%

As requested by a reader, we evaluate here the quarterly market commentary of Stephen Leeb since January 2003 (much of commentary archive removed in occasional site redesigns) with respect to his outlook for U.S. stocks. Stephen Leeb is president of Leeb Capital Management, Inc., editor of The Complete Investor newsletter and author of several books. The table below quotes forecast highlights from the cited source and shows the performance of the S&P 500 Index over various numbers of trading days after the publication date for each item. Grading takes into account more detailed market behavior when appropriate. Red plus (minus) signs to the right of specific forecasts indicate those graded right (wrong) based on subsequent market behavior, while red zeros denote any complex forecasts graded both right and wrong. We conclude that:

  • Stephen Leeb uses his proprietary Short Term Key, “a whole symphony of indicators,” to predict market direction four weeks ahead. His Long Term Key is “a certain measure of the price of crude oil [that] is the most perfect indicator of long term (12 months) stock prices ever seen.” The latter portends that “oilflation” will make the next ten years “worse than the 1970s,” with 95% of all stocks and bonds failing to beat inflation.
  • In evaluating his quarterly commentaries, we focus on actual stock market behavior three months out to match the commentary frequency, unless Dr. Leeb specifies a different forecast horizon.
  • His quarterly commentaries are not always dated. Consistent with those that are, we assume publication dates at the end of the month after each quarter ends. We skip commentaries within which there is no clear overall stock market outlook.
  • Stephen Leeb’s forecast sample is very small (although it spans over four years), so confidence in the measurement of his accuracy is very low.

See Guru Grades for a snapshot of the accuracy of various experts in predicting the direction of the U.S. stock market, including links to evaluations of the commentaries of other individual market pundits and gurus.

    S&P 500 Index  
Date Comments from:  Stephen Leeb via leeb.net                   21-Day Return 63-Day Return 126-Day Return 254-Day Return  
8/2/11 …the modest pullback in oil prices seen during the quarter was actually good news for the economy and the consumer. Seeing an environment of accelerating inflation and faster economic growth (thanks to expectations of continued help from the government), as well as stock valuations that were very reasonable coming out of the second quarter, we have positioned portfolios accordingly. -2.8% 2.5% 4.7% 10.9% +
3/11/11 As world economies improve, stock markets should continue to be the place for smart money to be, unless rising commodities act as a brake on recoveries. We don’t expect this to happen immediately, but it could certainly come towards the tail end of a largely positive 2011. 1.5% -1.2% -9.1% 6.9%
10/31/09 As US companies push through earnings season with easier comparisons versus the year-ago period, we could see the market climb higher.  However, in the absence of sustained revenue growth, cost-cutting and inventory controls will only help companies support earnings so much – and we expect the market to acknowledge this at some point. 6.4% 5.8% 12.5% 17.1% 0
7/31/09 The market appears to be locked in trading range, bounded by 960 on the S&P 500 on the upside and 870 on the downside. While we could see stocks muster a rally that carries share prices somewhat higher than that upper limit, the risks of the major averages retracing at least a good portion of their advance seems to be the more likely scenario. 3.4% 5.6% 8.7% 14.2%
4/30/09 At the very least we expect the recent lows to be tested one more time before a firm foundation can be laid. That pullback would likely take the S&P back down to around 700 or so. …stocks aren’t likely to run significantly higher.  8.0% 11.7% 21.8% 34.5%
1/31/09 We are fully invested in anticipation of a fairly healthy stock market in the coming months. …there is the potential for a powerful rally to unfold. -13.6% 6.3% 19.6% 32.9% 0
10/31/08 …sharp stock market corrections like the one we’ve experienced create tremendous buying opportunities. Valuations are now at their lowest levels in decades. The major market averages may struggle for a time, but…we have the potential for a powerful rally to unfold in the coming months.  -12.4% -14.8% -6.3% 8.0%
7/31/08 …the most likely scenario in the coming months is that…the overall stock market remains mired in a trading range. We’re at the bottom of that trading range now and could see a brief rally, but we foresee a sustainable move higher to be some ways off. -17.1% -8.9% -33.3% -20.7%
4/30/08 Looking ahead, we can’t help but be somewhat optimistic. The stock market itself is perhaps the best indicator of what’s happening in the economy, and the message it’s throwing off is fairly bullish. …We’re not looking for a run-away bull market but stocks should have an upward bias in the coming months. -7.7% -8.9% -42.5% -35.6%
1/31/08 …2008 could prove to be an extremely difficult year for investors. The one-two punch of a weak economy coupled with mounting inflationary pressures has led to the worst start for the stock market since the Depression. And this situation won’t be resolved overnight.  5.6% 8.6% -4.4% -39.2% +
10/31/07 …on balance share prices are still reasonably priced…the combination of low…inflation-adjusted yields and substantial growth prospects (both domestic and abroad) leave us optimistic about stocks’ prospects. -4.4% -11.0% -8.7% -37.6%
7/31/07 …the stock market is reasonably priced at current levels. 0.6% 5.5% -6.4% -13.4% +
4/30/07 …stocks are reasonably priced here. And the huge amounts of liquidity sloshing around in the system means there’s room for modest gains in share prices in the coming months. 3.2% -1.6% 2.2% -4.6% +
1/31/07 …the year holds a good deal of promise. -3.6% 3.3% 1.2% -4.0%
10/31/06 …we should see some follow through in the fourth quarter with stocks advancing further… 1.6% 4.9% 9.0% 9.0% +
7/31/06 …the investment climate will almost surely remain tough…today’s economy more and more resembles the 1970s…that decade was even worse than the 1930s… 2.2% 8.8% 11.9% 12.3%
1/31/06 As for the heightened risk of a major market decline, we are increasingly more cautious on the market… 0.7% 2.0% -0.3% 13.0% +
7/31/05 …the period ahead will be a particularly challenging one to all portfolio managers, including ourselves. -1.8% -3.5% 4.0% 3.6% +
4/30/05 …we are in the early stages of a difficult, turbulent market. There are a lot more wrong than right ways to play it. 3.0% 7.5% 3.0% 13.1%
1/31/05 …the market is shaping up to become a lot more challenging. In the months ahead, the major market averages probably will struggle simply to stay in place…real returns could be negative. At the same time, I’m not expecting a full-fledged bear market… 2.4% -2.1% 4.5% 7.6% +
10/31/04 …the future is likely to remain highly challenging for investors of all stripes. If, as we expect, inflation rises and real interest rates remain negative, such seemingly safe havens as cash and bonds will produce negative returns. Many stocks, and almost certainly those comprising the major averages, also will lose ground to inflation. 3.9% 3.6% 2.4% 6.4%
7/31/04 …in the months and years ahead, outperforming the market won’t necessarily mean you’re getting decent returns on your money. If, as we expect, inflation starts to pick up, the market is likely to lose ground in real terms. -0.2% 2.1% 6.6% 12.9%
1/31/04 …the factors that led to the market’s surge remain in place, suggesting the uptrend will continue. …no one seems to be arguing that we have embarked upon a new bull market that over the next few years will propel the major averages well past their previous highs….we placeourselves in that mainstream camp… 1.6% -1.5% -2.6% 5.5%
10/29/03 At some point in the near future we wouldn’t be at all surprised to see the market pause to digest its gains. But…over the next six months or so, stocks will continue to be strong performers. 1.0% 8.2% 6.3% 7.9% +
7/31/03 …we expect stocks – after a period of digestion – to remain uptrended for at least the next six months. 1.8% 5.7% 14.5% 10.9% +
4/30/03 …the remainder of 2003 – some scary dips notwithstanding – will be one of very positive returns. 5.1% 7.9% 12.5% 21.9% +
1/27/03 …2003 will be considerably better for investors, with the stock market gaining… Historically in the year before a Presidential election, the S&P 500 has racked up gains of 20 percent…we’d expect the market to easily reach that norm, assuming it is not sideswiped…rising energy prices. -2.4% 6.1% 17.8% 33.8% +
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