What Worries are at the Forefront of this Market?

The tides are turning.  We've spent much of the last 7 months worrying about Greece...and Spain, and Italy, and Portugal, and...today, we wake up on February 27th, 2012, and we find that in the midst of all of our worries, the S&P 500 seems to have produced a new high, along with most of the other indices, eliminating the damage from that 2011 correction.

But today, we can forget about Greece and all of those other debt problems.  Now we can start to stew over the price of energy, right?  There is little doubt that the problems in Greece and the price of oil have an impact on the economies of the world...and the performance of stocks.  However, there are a zillion other parameters out there that also affect the economy and the markets, and we measure a basket of those parameters with our Asset Allocation Model, which is giving us the following signal this morning.


There is most definitely an art to investing, but the science far outweighs the art aspect.  The science, that is not hyped by the flood of misconcieved analysis from the "guru of the moment," is saying loud and clear that long-term investors still have the historical odds in their favor.  As a result, investors, in our opinion, should continue to have maximum exposure to stocks and a minimum exposure to bonds and cash.

That is not to say we aren't concerned about Greece or the price of gas, but our Asset Allocation Model suggests that these worries are being overemphasized.  We recognize, however, that some of these key worries have the potential of clouding the investment scene for a while.  This fits into our thoughts concerning our recent Psychology Composite rankings of P4 and P5, which often precede a volatile short-term environment.

We've been taking this similar line of thought for the past several weeks, and today we continue to expect that while the short-term may get iffy, our long-term outlook remains very positive.

Don Hays

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