May be a long time 'til we see a go-go market

"It's possible that we'll be in a sideways market for the next 10 years," said Marcus Winbush of the Rochester-based investment firm of Breneman Winbush & Associates.

Throughout its history, the stock market has moved from long cycle to long cycle, alternating between robust growth and extended stagnation. For instance, the market was flat from 1902 to 1920 before a solid bull market leading to the crash of 1929. It experienced another long drought from 1929 to 1949, then entered a sustained bull run until 1966.

From 1966 to 1982, the market actually lost ground through a series of shortlived ups and downs. In 1966, it slipped into a four-year bear market, rallied briefly from 1970 to 1973, dropped off again in 1974, rallied in 1975 and 1976, and then skidded into a stall mode for the next six years. It finally transitioned into a bull market in 1982, which continued until 2000.

But for the entire period from 1966 to 1982, the market actually lost about 16 percent. The Dow Jones industrial average hit a high of about 970 in 1966 and dropped to a low of about 810 in 1982.

The contemporary market has been in a similar drought since 2000, when the Dow started out at about 10,920. After a series of ups and downs, the Dow is now trading at about 8,300 -- a decline of nearly 24 percent for the 8 1/2 years.

With the economy in the tank and a return to rising inflation expected, the market could move sideways for many years to come, according to Winbush. But he thinks there may be short-term growth opportunities along the way. "We could see a run-up in the market over the next 12 to 18 months. We may even see the Dow reach 11,000 by year-end, but I don't think we're on the cusp of a roaring bull market."

Winbush says he sees too many problems with the economy to hold out much optimism for a long-term bull.

"Right now, we're seeing big deficits and rising debt, with rising inflation on the horizon," says Winbush. "We're also seeing increased competition from China and other markets. It's hard to see how we're going to start hitting on all cylinders anytime soon."

Within that scenario, is there anywhere for investors to earn a profit?

"If you're investing in stocks, you'll probably need to be more active in your trading," says Winbush.

He is also looking for other opportunities outside the stock market, particularly in the commodities and bond markets. He thinks oil and gas prices, which are still well under half of their July 2008 peaks, could have a strong upside. "We may see some resistance in oil prices in the near term before they break through $60 a barrel and move up toward $80.

"We also think investors should have about 5 percent of their portfolio in some type of gold investment."

He also believes that high-yielding corporate bonds -- many of which are paying double-digit yields -- could be a good investment now.

In the stock market, he thinks the best values may be in consumer discretionary stocks, such as Best Buy, emerging markets, technology and energy.

Among the stocks that he would buy right now, however, no Minnesota companies make the list. He likes Corn Products International (CPO), which makes corn-based food ingredients. "It's a well-run company with a strong expertise in its market niche, it pays about a 2.3 percent yield and it currently has a very low price-earnings ratio [PE]." The stock closed Friday at $24.79, down from its 52-week high of $54.96, with a PE of 8.3.

Winbush also likes Dresser-Rand (DRC), which manufactures equipment for the oil drilling industry. "It earns about half its revenue from the aftermarket, providing parts and services for existing equipment," says Winbush. "The stock had a significant dropoff in price, so you can buy it cheap right now." The stock closed Friday at $25.03, down from its 52-week high of $42.49. It does not pay a dividend.

But no matter which stocks you invest in right now, you should be prepared to be very, very patient.