On the eve of Election Day, here's where our Asset Allocation Model sits:
Since May of this year when our Psychology Composite moved up to trigger that nervous condition of P5, along with the old adage of "sell in May and go way," we added a cautionary tone to our short-term strategy, which you've heard from us very persistently since then. But here we are in November, and the adage of "sell in May and go way" also tells you to come back in November, but we don't pin anything on that seasonal tendency unless our Asset Allocation Model directs us to.
In June of this year, we had just witnessed a very weak market in May, and the international stock market got creamed as the European Union was teetering on the brink of collapse. With that action, our Psychology Composite improved to P3, and if you looked internally, you could see that many of the technical indicators were flashing very positive signs. P3 is not quite the full P2 we had hoped for, but the historical statistics told us the odds of a positive return in the next 12 months was close to perfect.
Moving forward to today, even with Psychology slipping down to P4 again, and Monetary slipping to M2, the historical odds of having a positive stock market return in the next 12 months are still very positive sitting around 93.5% according to our Asset Allocation Model, despite the lackluster historical returns experiened over the next 6 months when our model has been in the same condition as it's in today.
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