It’s time again for the barrage of year-ahead stock market forecasts from Wall Street’s bevy of experts. With so many well known forecasters so wrong so often, who should we believe?

Stock market guru Elaine Garzarelli, who has wowed Wall Street with her unerringly right forecasts for the direction of equity prices over the past five years, certainly merits strong consideration.

In October 2002, with Wall Street in shell shock over the dotcom bloodbath, fear rampant and the Dow at 7,200, she made a gutsy market call, flashing a buy signal to her clients. She has remained bullish ever since. Some of her peers thought she was crazy for maintaining such a prolonged bullish stand. She’s crazy all right — crazy like a fox.

With the Dow subsequently ballooning earlier this year to more than 14,000, Ms. Garzarelli again displayed her crystal ball gazing. Obviously, anyone who heeded her advice over the past five years and didn’t waver made a bundle. Her steadfastly positive view of the market — which also typified her thinking during much of the 1980s — has earned her the moniker “Go-Go Garz.”

So what next? “More of the same, a great 2008,” she tells me. Despite a slew of worries, among them a collapsing housing market, the threat of a recession, the subprime crisis, the likelihood of more billion-dollar asset write-downs, and the plummeting greenback, Ms. Garzarelli remains gung-ho on the market.

“I’m extremely bullish,” she says. “The time to buy stocks is when there’s panic and blood in the street, like there is now.”

“My indicators,” she adds, “tell me the correction [a recent 10% drop in stock prices] is over.”

As CEO of Garzarelli Capital, Ms. Garzarelli doles out investment advice to 103 institutional clients with combined assets of more than $1 trillion. She tells me she believes an economic rebound in the second half of the year; continued credit-easing by the Federal Reserve, bringing down short-term rates to 3.5%; and a bit of a recovery in housing should ensure a winning year for the stock market in 2008. She figures the economy will be goosed by a rebound in consumption, a buildup of inventories, and strong exports, which she bases on her expectations of a continued flat dollar.

Another key reason for her positive market view is the improvement in her indicators, which she notes are 71% bullish. Anything above 65%, she says, represents a buy signal. Those indicators — economic momentum (which includes industrial production and earnings), monetary policy, valuations, and market sentiment — suggest to her that the S&P 500 is currently 30% undervalued. As such, she sees at least a 20% rise in stock prices over the next 12 months.

By the same token, Ms. Garzarelli isn’t looking for any robust economic or earnings growth numbers. She expects the gross domestic product to experience a growth of just 1% in the current quarter and the first quarter of 2008. For all of 2008, her outlook calls for GDP growth of 1.9%, while earnings growth is pegged at only 7%, a substantial slowdown from the double-digit gains recorded in recent years.

Given her economic scenario, she says investment strategy should focus on those industries that can best capitalize on next year’s rebound in the economy, namely the transportation, retail, and financial sectors. Her top picks are a trio of exchange-traded funds featuring major companies in those fields that trade under the symbols IYT, RTH and XLF.

Her three favorite stocks for the new year, all of which she sees outperforming the market by a hefty margin, are Union Pacific, Home Depot, and Lehman Brothers.

Ms. Garzarelli also favors investments in Brazil, Russia, India, and China. Her top overseas pick is an ETF, basically a global fund that trades under the symbol EEM.

By the same token, she says she would shun defensive-type sectors, including consumer staples like brewers and soft drinks, as well as consumer products such as cosmetics. Gas and electric utilities are also on her hate list.

What about Wall Street’s hero of the past three years, the energy stocks? That’s another no-no. “I would underweight energy,” she says, arguing that the price of oil, currently in the high $80s, is too high based on fundamentals. “I could see oil at around $75 by mid-2008,” she says.

What could go wrong? Her response: “If oil prices should rise to $125 a barrel, which would mean a recession, or if inflation comes back, which would prompt the Fed to stop easing. If either were to occur,” she says, “then all bets are off.”

dandordan@aol.com