Monetary Liquidity + Historically Cheap Stocks = Bull Market

Here's what our Asset Allocation Model is telling us today:

We've been talking about Psychology a lot lately, but let me remind you that historical algorithms show that when you have Monetary Liquidity at today's levels, while, at the same time, inflation progression is still moderate and the money is starting to be used, in conjunction with an historically cheap Valuation for the stock market, investors are going to be treated with a BULL MARKET over the ensuing period.  Yes, trends in Psychology have short-term effects when in a slightly yellow or red zone, maybe even altering the internal nature of a rally.  But when you have Monetary Liquidity that is so powerful, you should bet on growth, because growth WILL prevail.

That's the bottom line.  So for the last four weeks, we've had crisis after crisis.  And guess what?  We've seen them all in triplicate on the tube.  They can just show the same scene 10 times, and it will feel like it has actually happened 10 times.  It is very difficult to know what the truth actually is sometimes.  That is why I decided many decades ago that I had to develop a filter to let me know how to react, and so we incorporated that filter into our Asset Allocation process.

I've spent 42 years in this business, and I'm telling you, everyone is craving to get on the soapbox to tell their story - whether they have credentials or not.  We constantly check the credentials of our Asset Allocation Model versus its performance, because we live in an ever-changing world.  But if you can actually measure the changes taking place, then you can have an insight track of what the stock market is going to do.  So, if the stock market is the best barometer in the world to interpret tomorrow's headlines, and we have the best discipline (Asset Allocation Matrix) to predict the stock market, then we have an inside track.  That is our mission, and we have spent our careers making sure we stay true to it.

Our bottom line is...stay bullish, despite (or maybe because of) the news.

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

Don Hays

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