The stock market has been trying to find its bearings in the last few weeks and may be reaching its top, according to Peter Anderson, chief investment officer of IDS Advisory Group Inc., Minneapolis.
A correction is likely in the coming months, followed by a year-end rally, said Mr. Anderson.
In his latest research report, Mr. Anderson says the market is overvalued; he notes the Standard & Poor's 500 Stock Index is selling at record price-to-book ratios, and the average dividend yield hit a record low of 2.5%. At the same time, optimism is high and cash positions are low among mutual funds.
On the other hand, said Mr. Anderson, the economy is in good shape, inflation is under control and growth is picking up, so corporate earnings will be strong and interest rates will head lower.
"Keep your powder dry," advises Mr. Anderson. "Once the correction is completed, we should get a year-end rally, and likely it will be a pretty good one."