The last several years have truly tested the mettle of investors and financial advisors. At Hays Advisory, we empathize, as it has been very tough on us as well. Our Asset Allocation Model that had consistently called every major bear market for several decades failed to predict 2008's painful downturn, and for 12 years now, the market has gone sideways. No wonder investors are tired and discouraged.
At Hays, we have used this frustration as fuel to push us to get better. Over the last two years, we have put our heads down, torn our research and investment process apart, and rebuilt it to a point where we believe we are the best we have ever been. After 2008, our director of research, Mark Dodson, took on the challenege of revamping our Asset Allocation Model. This was a huge process as he has spent hundreds of hours scouring through and back-testing data from many different sources, and the results have revolutionized our model.
As you know, our model focuses on three key legs (Investor Psychology, Monetary Conditions and Stock Market Valuation), and since the bear market of 2008, we have now dramatically upgraded each of these components. We have also created our revolutionary technical tool (the Market Trend Analyzer) in recent years, that helps buffer unforeseen, serious secular bear market declines not being forecasted by the three main components of our Asset Allocation Model. So while we are frustrated with the current market, we are confident that we have a disciplined investment approach that can deliver in good times and bad, and here's where each component stands today.
While we are always looking for new indicators, the major revamping of our model is complete. As you can see above, Investor Psychology, Monetary Conditions, and Valuation all are currently giving extremely bullish signals. Based upon market history, the odds of a bull market are heavily in our favor. And if the odds do not pan out and a bear market ensues, the Market Trend Analyzer should trigger and take our portfolios to a much more defensive stance.
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