Hopes get specific after boring ‘05

NEW YORK – Ever have a day when you wondered why you bothered going to work? Imagine how you’d feel if the whole year went that way.

Ask a Wall Street trader – stocks’ 2005 activity can be described by a nearly flat line. How can stocks escape from Nowheresville? The Street’s big thinkers are eyeing each road out with a mix of hope and greed.

Hope No. 1: The Federal Reserve stops raising rates.

Sure, interest rates are still near historic lows, although the Fed has raised them 13 straight times. But the march of rate hikes still makes equity investors twitchy.

Hope No. 2: Everyone will share the Street’s epiphany that large-cap stocks are undervalued.

Merrill Lynch’s Richard Bernstein said, in a recent note, “One of our themes for 2006 is the possible return of deeply out-of-favor larger capitalization companies.”

Hope No. 3: Energy costs and inflation really do decrease.

With lower energy costs and lower inflation, companies could pump more money into capital spending and consumers could stop worrying about filling the gas tank and focus on shopping.

Hope No. 4: The housing market slowly deflates.

We’re not talking about a dramatic burst, but rather a slow air leak.