Is the market on a path to recovery?

0 Comments | USA TODAY, December, 2007

Richard Bernstein: Our story for '08 is, market volatility will continue to go up as we see more issues, not just in the U.S. but around the world, related to the tightening of the credit markets.

The U.S. subprime mess is a symptom of a much bigger problem. The underlying problem is that we had a credit bubble, and credit conditions are now tightening. The first symptom is the tightening of U.S. subprime, which is close to the epicenter. But what we think is going on is a tightening of the global credit markets.

How will those forces affect stock prices?

Bernstein: We see a relatively flat market for the S&P 500 over the next 12 months. Our updated models are now predicting only a 3% expected return. For the past year and a half, they have been...