These are unique times in American history...but really, aren't they all? In our world of overdosing on investments, most of the daily news has to fit in with how the stock market is acting. But in our case, it has to fit in with the message that our Asset Allocation is giving us. And for 42 years, we have always been caught up in the moment, and we ALWAYS say, "It is different this time." But our record is based on something besides our emotional response to the "moment."
Sorry Ladies and Gentlemen, but here comes 1994 again. That comparison of the Clinton liberal agenda being forced to the center, accompanied by a Peace Dividend as the Cold War was winding down, produced a gain of 240% over the next six years.
The two charts below line up the action following the 1994 election and the most recent election using the breakout of the S&P 500 as the starting point.
If you remember the 1995-1996 experience, we had just come out of a serious recession from 1992, in which the Fed created huge monetary liquidity. Then, they started to normalize the interest rates in 1994, and every month for the net two years, we saw another tightening move. You can see the tempo of the stock market certainly taking on a new hue in the first five months following the election - then and now.
So...here we are again. With the noise in the background so volatile and loud, with the time approaching that the Fed will have to start removing the excess liquidity, with stocks so very cheap, with earnings continuing to move up, with the War on Terror close to having some relief from the massive spending of the last few years and with a sobering up of the liberal swing that seemed to be in the cards in 2008 that has now moved Obama back toward the middle, we believe the 1994 example is one we should tape to our wall.
It is going to be a lot of fun, through the sweat and tears of the herd's emotions that are almost sure to invade our brains, but if we remain true to our unemotional discipline, we will overcome.
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