The Evolving History of a Free Capitalistic World

On this morning after the State of the Union, I'm overwhelmed by what is happening, and what has happened, in this world.  We get so caught up in the moment, and it doesn't matter whether you are a Keith Olbermann or a Glenn Beck fan, your sensitivities are driven by the popular subject of the day.  All you have to do is look at the Presidential Approval Index over the decades to see how emotional our logic is.

For the short-term, we're still watching our Psychology Composite (now at P5), because it needs a little healing.  However, bull markets can go on and on with Psychology on the weak side if good monetary liquidity, cheap stocks and increasing earnings are also present.  But if we had our druthers, we would like to see our Psychology Composite improve to at least a P3 before we get all hands on board in this tug-of-war. 

And of course, it's now earnings season.  So far, we've seen good numbers from those companies that have already reported.  It is hard to imagine, but those catastrophic declines in 2008 and 2009 have been erased, and earnings are now at a new high.  You can also see the trends of the 12-month forward earnings expectations in our chart below.


I fully believe that historians in 20 years will look back at this time and see an amazing and needed catharsis that produced an essentially free world.  We have learned many great lessons over the past 30 years.  Not one of them has been fun, but they have set the stage for a great future.

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

Don Hays

Please see important disclosures at the bottom of this page.