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What returns can we expect from the stock market?
As of today, the Total Market Index is at $ 12133 billion, which is about 83.9% of the last reported GDP. The US stock market is positioned for an average annualized return of 3.4%, estimated from the historical valuations of the stock market. This includes the returns from the dividends, currently yielding at 0%.

As pointed by Warren Buffett, the percentage of total market cap (TMC) relative to the US GNP is “probably the best single measure of where valuations stand at any given moment.”

Over the long term, the returns from stock market are determined by these factors:

1. Interest rate

Total Market Cap and US GDP

Interest rates “act on financial valuations the way gravity acts on matter: The higher the rate, the greater the downward pull. That’s because the rates of return that investors need from any kind of investment are directly tied to the risk-free rate that they can earn from government securities. So if the government rate rises, the prices of all other investments must adjust downward, to a level that brings their expected rates of return into line. Conversely, if government interest rates fall, the move pushes the prices of all other investments upward.”—Warren Buffett

By Keiko Ujikane March 24 (Bloomberg) — Japan’s exports climbed at the fastest pace in 30 years in February as global trade recovered from the worst postwar recession, increasing prospects for a sustained economic rebound in the nation.

Shipments abroad increased 45.3 percent from a year earlier, helping the trade surplus expand the most since 1982, the Finance Ministry said today in Tokyo. At 5.1 trillion yen ($57 billion), the value of exports remains about a third lower than the March 2008 peak of 7.7 trillion yen.

Demand for Japanese goods rose to all regions for the first time since August 2007, the report showed, fueling sales for companies from Komatsu Ltd. to Mitsubishi Electric Corp. The trade revival has spurred factory production for 11 months, gains that economist Akiyoshi Takumori expects will continue.

“Before, exports were rising mostly because of Asia, but now the U.S. economy is rebounding, too. That’s definitely a good sign,” said Takumori, chief economist at Sumitomo Mitsui Asset Management Co. in Tokyo. “It’s very unlikely that Japan’s recovery will falter this year.”

Tim Paradis and Ieva M. Augstums, AP Business Writers, On

Friday March 12, 2010, 10:35 am
NEW YORK (AP) — Stocks traded in a tight range Friday after mixed reports on retail sales and business inventories gave investors little new insight into the economy.

Stocks had been higher at the start of trading Friday after a surprising increase in February retail sales. But investors were displeased with the Commerce Department’s report that inventories were unchanged, since economists had forecast an increase. Economists are hoping that businesses will restock store shelves on a sustained basis and give the economy a lift.

The Commerce Department said retail sales rose 0.3 percent last month. Analysts had expected sales to drop.

In midmorning trading, the Dow Jones industrial average rose 3.33, or less than 0.1 percent, to 10,615.17. The broader Standard & Poor’s 500 index fell 2.56, or 0.2 percent, to 1,147.68, and the Nasdaq composite index fell 8.75, or 0.4 percent, to 2,359.71.

Bond prices were mixed. The yield on the benchmark 10-year Treasury note, which moves opposite its price, was unchanged at 3.73 percent.

Crude oil rose 1 cent to $82.12 per barrel on the New York Mercantile Exchange.

Is there any sign that a stock price is going to go up or down? What do we have to pay attention to in order to predict the movement of the price? There are seven things you can observe actually. All you need to do is to recognize them.

1. News and Rumors.
Pay close attention to the news. Mergers, takeovers, acquisitions, new product releases, new CEOs will definitely affect the company’s stoke price in the market. Read your business newspapers and watch the business news to get the best prediction.

2. Options
High open interest can mean someone is probably hedging his positions. But you can use it to tell the possibilities of the future too. The higher the interest, the higher it should catch your attention too.