Seeing the Forest for the Trees

There seems to be a slightly larger chorus of bears creeping into financial commentaries of late, with negative predictions for the year ahead.
However, I believe that we will have at the very least, net positive growth in the indices for 2006.

Over at MSN Money, Melissa Lee polled seven Wall Street firms on their 2006 predictions. Five out of the seven had resoundlingly positive expectations for the S&P 500.

The folks over at Forbes.com seem to think that growth, innovation, and the positive stature of large corporations will drive productivity.

Even Jeremy Siegel, Ph.D. over at Yahoo! Finance believes that there is undervaluation to be found in the market, stating that:
"Earnings growth rates have maintained double-digit increases for a record 13 consecutive quarters, yet stock prices have crept up much more slowly. This has compressed the price/earnings ratios of stocks, that all important measure of stock valuation. "

So what's the bottom line?

Yes, there are still stocks that are extremely overvalued, and it is rare that I would consider any stock with a price/earnings ratio higher that 20. But on the flipside, 2005 marked a time of record stock buyback programs from companies that are flush with cash, and these buyback programs are still ongoing. The Fed will most likely cease raising short term lending rates at or near 4.5%.

So how do I feel?
At the moment I would say that I am cautiously optimistic.

Let's see where the financial news of the first week of 2006 brings us.