I have been in my current job, mutual fund accountant, for a little over 2 years now. (I was one before -- just before and during the dot.com crisis. I pick lousy times to be in the industry. :) In my spare time at work, I go on Bloomberg and read most of the interesting articles. I get to not be bored *and* it is work related!
Between my job and Bloomberg, I think I've gotten a pretty good idea of what the stock market is doing these days and what it will do in the nearish future. I want to actually write this out so I can see later whether my knowledge and the economic theories are correct or not. My memory sucks, so this will keep me honest.
Note that this is only about the stock market. I've only really studied it, not the general economy. I don't know how long the rest of the economy will take to recover -- longer than the stock market, but I can't be more precise than that.
My near term prediction is that we are at or near the stock market bottom. Earlier this month, the news and predictions on Bloomberg became overwhelmingly negative. Everything was bad, everything was going to get worse. Now, according to the market theories I subscribe to, this means that the market was about to go up -- which it did, when I was home sick, otherwise I would have posted this earlier. :)
Now, while I am confident that we are at the market bottom, we could skitter along the bottom for a while. The last two days, the market went back down. It could go down more and it may do so a few more times before it genuinely heads up. But it won't go below the recent lows, and the S&P 500 definitely isn't going to go down to 600.
My other qualifier is that some currently *unforseen* disaster could send the market back down again. There are some possible disasters on the horizon that will probably cause a bunch of damage to the economy, but they're priced in to stock prices already. For example, in number of banks, including Bank of America, could go under. Hedge funds will go under and private equity firms will go under. This is all expected and shouldn't really affect the stock market much.
Part of what will fuel the near-term stock market rise will be acquisitions, especially amongst pharmaceutical companies. There will be a feeding frenzy, as big companies whose patents are expiring try to buy new revenue streams. Again, this is already happening, so it's not much of a prediction, but it will keep happening. Apparently, the same will also happen in the health care industry. Humana is a target, for some unknown reason.
In the mid-term, the Nasdaq stock market will finally recover, which it hasn't, really, since the Dot.com era. Tech stocks will go up and this will be a more genuine rally than in the late '90s, since the companies will actually be worth something. They will begin replacing financial stocks as the stars.
My longer term prediction probably will sound unbelievable to a lot of people: US manufacturing is going to recover. Companies that actually make things, in the US, will be a major growth area. Why do I predict this? Oil has gone done in price, but it *will* go back up. The cheap transportation costs that helped fuel manufacturing in the developing world will not come back.
Equally importantly, Mexico is increasingly in chaos. As the Colombian cartels were destroyed, the Mexican distributors grew in power. They have grown more and more violent, until they regularly assassinate police officers. They even assassinated the head of federal anti-cartel operations in Mexico City itself. Even excluding the killing, kidnapping has become a major industry in Mexico and foreign businessmen are an enticing target. Mexico is becoming a more and more unattractive place for manufacturers.
So, if you can't get the cost savings through overseas production, and Mexico is out (and Canada is simply too small), that leaves the US. Just as the market is at or near a minimum today, US manufacturing is at or near a minimum. It will come back and US manufacturing companies will, in 5 or 10 years, be big again.