There are all kinds of cute calendar themes to observe. So, as we start sneaking into the end of the year, let's look back at this "scrambled egg year" and see what really drove the market. Of course, you have to put this year in the context of where we've come from. Last year was a barn-burner, as the S&P 500 moved up 67.4% from that devastating March low. But the first half of this year was spent repairing the cracks in the "Wall of Worry." Our Asset Allocation Model detected those cracks in April, but it also said that long-term investors had to keep thier eye on the very promising long-term.
We believe that core America (as measured by the S&P 400) is much stronger than large-cap America (as measured by the S&P 500). Core America has been sending a much healthier message for most of the year, and you can see such a trend in data such as Consumer Sentiment, which just hit the highest level since the Financial Crisis of 2008. Small businesses are also more optimistic today, and retail sales have seen a surge since 2008.
So, what does 2011 bring? It is a pure guess if you come up with some target for the year, but with the combined story being told by Psychology, Monetary, and Valuation, we are optimistic.
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