Oil and gas exploration and production shares and exchange traded funds have been rallying as investors bet on a shale boom. Recent data released from the International Energy Agency is supporting the profitability of major oil service companies.

"In its 'Medium-Term Oil Market Report' released Tuesday, the IEA said the production onslaught will have impact on the oil market over the next five years as much as swelling Chinese demand did over the past 15 years. What's more, it will force companies to change how they transport, store and refine oil in addition to their investment strategies," Trang Ho wrote for Investor's Business Daily.

The shale boom will have a positive impact upon major oil service companies and independent service operators. Well-known companies such as Halliburton (HAL), Schlumberger (SLB) and Baker Hughs (BHI) are in line to profit, backed up with billion dollar research and development budgets, noted John

My 2013 outlook is coming a bit late this year and so readers should assume that it covers the period from February 1 through December 31, 2013.

Let us review where we have stood previously. I was tactically (medium-term) and strategically (long-term) bearish at the beginning of 2012. As detailed in my latest article, the scenarios for Europe that I expected did not transpire, and by late August of 2012, I called off my bear market prediction and suggested a more constructive tactical stance. In my most recent article I explained where I think my tactical S&P 500 forecast through August 2012 went wrong.

For reasons I have detailed elsewhere, I have not changed my view that real (inflation-adjusted) equity market returns in the next 10-20 years will, on the whole, be significantly below historical norms. However, this essay will concentrate on the medium term prospects for US equities and