The stock market is a great barometer. It reads tomorrow’s headlines. On July 8th of this year, our Psychology Composite surprised even us as it hit P1. Usually you only get those readings as major bear market lows are being produced. Here we are five months later, and here come the headlines.
- Initial Unemployment claims hit the lowest level in over two years.
- Personal Income moved up to the highest level in two years.
- The PCE Core Inflation is the lowest it has been in 10 years.
- Corporate profits and margins are soaring.
- Productivity and pay are at record highs.
- Real pay per worker has been soaring.
The Asset Allocation Model, as presented each Monday morning, is still showing that long-term strategy should have maximum exposure to stocks, minimum exposure to bonds and cash.
On November 15th, our Psychology Composite moved to the P4 condition. For up to 10% of your portfolio, we suggested you walk a little slower in the days and maybe weeks ahead. Our Psychology Composite is still P4, and for the last few years, that has always preceded at least a short-term correction. So, the theme was do a little portfolio fine-tuning, but don’t let your cash allocation move up by more than a 10% margin. Last Wednesday, you heard us whisper for the first time that conditions now warranted just a little “nibbling” with that 10% cash.
We believe that the next year is going to produce amazing gains and much better headlines with the potential of the NASDAQ moving up to 3800 (52%) in the next couple of years, or maybe sooner. And that is why we say…start nibbling.
To read today's complete Market Commentary, click here.
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