More upside for stocks and bonds?

Barry Ritholtz gives his views on the stock market to SmartMoney.com. He is optimistic for the next few months.

"If my timing is correct, and if my macroeconomic assessment is correct," says Ritholtz, "there will be a rally from June through November. That period -- that five-month period -- will encompass a significant rally. Historically, the last rally of a bull market tends to be the strongest within the cycle."

But he is pessimistic thereafter.

"I suspect the present rally will run longer and further than many expect," he says, "but I also think that the potential downside into 2006 is quite substantial. I don't want to put a number on it, but it could surprise people a great deal."

Bonds may also be in for a good spell near-term, according to Mark Hulbert at MarketWatch.

[T]he average short-term bond timing newsletter remains almost completely out of bonds. From a contrarian point of view, that is encouraging. It means that we are nowhere close to the excessive bullishness that often characterizes market tops.

The basis for his conclusion? The Hulbert Bond Newsletter Sentiment Index (HBNSI), which measures the average exposure to the bond market among bond market timing newsletters tracked by the Hulbert Financial Digest.

As of Wednesday night, the HBNSI stood at just 1.1 percent. To be sure, this is the first positive HBNSI reading (even if only barely) since February. It is significantly higher than the record low reading of negative 67.4 percent registered in early April... Nonetheless, the HBNSI remains well below its all-time high of 72.2 percent.

I have one caveat though. Nowadays, any gauge of sentiment for bonds that does not take Asian central banks into account risks underestimating the true demand for bonds.