Most would deny it, but brokers are a superstitious lot. Perhaps it is the 22nd anniversary of Black Monday on Oct. 19, but October is regarded as a spooky month. As always, opinions are divided on what the future might hold, but many market experts continue to regard recent economic data with guarded optimism while some remain resolutely bearish. As the year draws to an end, here’s what some leading commentators are saying.

Over the past few months, U.S. investors have leapt back into the stock markets faster than experts predicted. Their return was spurred by positive third-quarter earnings reports and by the psychological boost caused when the Dow Jones Industrial Average passed 10,000 for the first time in a year. Investors are returning to basic pre-crash principles. That is, keep most of your retirement savings in stocks and rebalance your portfolio with the aid of tax and financial experts once a year to reflect the economic performance of various sectors, and determine the right mix of non-U.S. stocks, bonds and other financial vehicles. However, things are not quite like they were before the crash. Alongside conventional wisdom, a new set of ideas and philosophy is emerging.

• The economy remains fragile – there are indications that growth is increasing – but there could still be big bumps in the road ahead.
• Experts don’t expect a return to double-digit gains anytime soon.
• With less return on investment, reducing investment costs is crucial – investigate what your mutual funds are really costing you.
• Consider low-cost index funds or exchange-traded funds as replacements for poorly performing managed funds or those with above-average fees.
• Diversification remains important, but consider lower-risk fund options.

Factors to Watch
Not all brokers have revised their bearish sentiments. Some caution that the market is running contrary to the U.S. economic performance, and that earnings look good mainly because of government stimulus dollars. They fear that all we’re seeing is a short-term rally in a bear market – a brief respite after a devastating downturn. These cautious investment pros cite the job market as a problem and believe that consumer spending will be curtailed for some time. Increasing budget deficits and federal and state spending worry them, too. Unlike other downturns since World War II, the recent slump affected high-end consumers as well as middle-income earners. Because of its wide-reaching impact, some bears believe that we’ll see low gross domestic product growth for several years along with lower annual returns on investments.

Many Wall Street experts expect global economic growth will begin overseas, and domestic consumer spending will continue to decline as shoppers tighten their belts. They predict low interest rates through 2011, with high rates of unemployment persisting through 2010. The expectation is that consumers in emerging markets will be the ones who fuel the global economy with their newly minted discretionary income going to buy smart phones, flat-screen TVs and computers.

Whether pessimistic or optimistic, pundits seem to agree that employment is the key and that improvements in the job outlook are crucial to long term economic recovery and sustained market growth. For more information and helpful advice, consult your tax advisor.