With stocks off to a rousing new year’s start, those glowing year-end forecasts of lofty 2006 market gains ranging from roughly 7% to 23% no longer seem like blue sky predictions. Such forecasts, it’s worth noting, are often peppered with the following sunny rationale:

* Interest rate hikes are coming to an end in the current credit-tightening cycle.

* The economy is on solid footing (though try telling that to the record 2 million Americans who filed for personal bankruptcy last year).

* A pickup in business spending should juice up the economy and help offset any slowdown in consumer spending.

* The war in Iraq is winding down and we’ll soon see some troop reductions there.

Sounds good, but several skeptics warn it’s not all clear sailing. One is the chief investment strategist of Raymond James Financial, Jeffrey Saut, who tells me, “Wall Street is way too positive on the market.” It’s not that he envisions any bloodbath, but rather, he believes, “2006 is going to be a very difficult year, say up or down 5%.”

Why such a worry-wart? For starters, he notes economic momentum is slowing, with earnings growth regressing to single digits. He also believes the Fed is far from done tightening (a view shared by a Merrill Lynch strategist, Richard Bernstein, who is predicting a down 2006 market).

Mr. Saut’s concerns also include a broad number of geopolitical worries. In this context, he questions whether the fighting in Iraq and Afghanistan is actually winding down. He also points to China’s recent announcement that it will diversify more of its reserves out of American dollars and Treasuries. Further, he cites Israel as a wild card, especially if there’s a militant successor to Prime Minister Sharon. Potential problems involving Iran and Venezuela are also mentioned.

Despite his market concerns, Mr. Saut thinks there are still a number of money-making possibilities in what he describes as “stuff stocks” – notably basic and precious metals, oil, gas, and coal. Likewise, he thinks it makes sense to invest in things needed by such explosively growing economies as China and India (like clean water, fertilizer, and copper) and disinvest in things they sell (such as technology products and cheap Chinese cars, which will make their American debut 2007).

Dating back to December 1995, at the end of each year, analysts at Raymond James pick their favorite stocks for the year ahead. Their stock-picking abilities are pretty impressive. According to Mr. Saut, the picks have recorded a compounded annual gain of 42%.

This year’s picks number 11.They are Briggs & Stratton, Nabors Industries, Amdocs, Ltd., Chubb Corp., UNOVA, Inc., Chesapeake Energy, Dell, Life-Point Hospitals, Republic Services, Ryanair Holdings, and U.S. Bancorp.

Though enthusiastic about the selections, Mr. Saut nevertheless is quick to inject a cautious note, observing, “it’s just a mistake to be too bullish this year.”

That’s also the sentiment of John Harris, a member of the multibillion dollar Harris banking family of Chicago and an investment consultant to some of the family. Mr. Harris, who thinks “events are stacked against the market,” contends, “this is a year to preserve assets, not to play with them.” He’s particularly concerned about huge consumer and government debt; China’s surging oil demand; rising mortgage rates, which mean the housing market has to slow, and the fact “other countries are outinventorying, outproducing, and outhinking us.”

It all adds up to what he believes will be a modestly lower 2006 market.

Still, he thinks certain areas will shine this year, namely energy (“The world needs more of it, and there’s not enough to go around.”), utilities (which should benefit from growing rate relief), and luxury goods (“because the rich are only getting richer”).

Meanwhile, money manager Leonard Mohr of Los Angeles-based MCR Associates looks for the market to suffer repeatedly this year from worrisome geopolitical events. He points in particular to concern about Iran’s nuclear ambitions and raises the question: “Does anyone seriously believe there will be peace in the Middle East in our lifetime?”