2011 Begins. Monetary Moves to M3.

I have tried valiantly over the last 42 years in this business to withdraw our market outlook from my prognosis of the future trends based on today’s news. One of my real blessings over the last two years is my resolve to never turn on the TV financial news (propagator and accelerator of today’s emotions). You should try it. It helps your investment decisions.

You do get a hint, however, of what I do pay attention to—the evolution of our Asset Allocation Matrix. We have an exciting contest going on now between our Psychology Composite that has been evolving in the P4 zone for a while, and dangerously close to P5, while the Monetary Composite has slipped slightly, but it is still in a healthy M3 configuration. As you remember, typically the net effect of Psychology and Monetary has determined the direction of the stock market, and Valuation determines how far up or down it will go. As important as each of these components is, I believe the most important part of our analysis is the matrix that puts them all together.  So today, my friends, we are evolving into 2011, and here is the condition of our Asset Allocation Matrix.

This is not giving us the same roaring bullish advice as it did on July 8th, 2010, but it is still telling us to maintain previously recommended positions.

So, what is our outlook for 2011?

To read today's complete Market Comment, click here.

Don Hays

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