By: Nand Arora

Many reasons to be optimistic predicting the direction of the stock market accurately is a hopeless task, and making money from it is even harder.  Yet, many analysts and economists make their predictions, and people invest in securities, based on their recommendations. Any savvy investor, economist, or analyst can tell you that the best way to make money in the stock market is to buy low, sell high, or just hold on to your diversified stock portfolio until such a time.

Sounds simple, right? Maybe, but the task is much harder than it sounds. It is a gargantuan task that can be accomplished with basic knowledge of how markets work; with willingness to do homework, take some risks, and above all, be in it for the long haul.

On Friday, February 1, 2013, the Dow Jones average closed at 14,009.79. The Standard & Poor’s 500 stock index at 1,513.17, and the NASDAQ composite index at 3,179.10. – All three indices were hovering at or near record highs. To put that in perspective; if you had invested in stocks worth $5,000 in an S. & P. 500 index fund in March 2009 at the bottom of the market, it would be worth $10, 000 today.

But who was even thinking of investing in stocks in 2009, with memories of the financial crisis, housing meltdown, and severe recession still fresh in our minds, and unemployment at 8.5%? Most people were worried about the breakdown of the Euro Zone and the U.S. economy slipping back into recession due to politic gridlock in Washington.

That’s exactly my point, though the market had hit a new low because of investors leaving the stock market and putting their money in safer investments. But those who saw this as an opportunity started putting their money into the stock market. Remember the buy low mantra?

So, now that the stock market is at or near record high, can it go any higher? The simple answer is yes. The current rally still has legs, primarily because many small investors have failed to participate in it and the current rate of unemployment is still too high, at 7.9%.

The Fed says that as long as inflation is below 2.5% and the unemployment rate above 6.5% – both of which are true, it will continue to use expansionary monetary policy.The Fed will continue to keep the interest rates ultralow and keep buying bonds to boost the economy. There is an adage on Wall Street that says: “Don’t fight the Fed.”

Finally, we did not fall off the cliff. We have overcome one crisis after another. As the fog of various crises has cleared, we can now focus on the cascade of good economic news pointing to a growing housing market, shrinking unemployment, stronger than expected corporate earnings, strong auto sales, and improving performance of the manufacturing sector.

There are enough reasons to be optimistic. We can expect the Dow Jones average to reach a new high of around 15,000 in 2013. In short, the sun is shining, at least for now, and is expected to continue to shine into the foreseeable future. However, bring your umbrella just in case. 

Caution: I am not a stock broker or a financial consultant. Therefore, I am not suggesting whether someone should or should not invest in the stock market.