Investor Psychology Improved Last Week

We're in that final leg of putting 2012 to bed.  The seasonal tendencies of this time of year - from two days before Thanksgiving to a few days after the New Year - have the historical best performance of the year.  This morning we have good news from the early Christmas shopping, we have good economic news from China and Germany, and we're sitting on strong gains in the stock market for the last three days of trading. 
 
As we've recently mentioned that we've been watching closely, our Asset Allocation Model did finally experience a positive shift as Psychology moved to P3 last week.  So, here's the latest view from our barometers.
 
 
If you think about our variables, remember we have 6 different rankings for Psychology and Monetary, and 5 for Valuation.  So there are 180 different possibilities.  Even though we are studying over 3 decades of historical experience, we see that only a small percentage of days have experienced this type of condition - P3, M2 and V1 - in the past.

It is an evolution; yet, typically when we've seen these levels in the past, it's suggested that the odds were mixed in the short-term, but they were in investors' favor looking out 12 months.

Don Hays
 
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