I get hundreds of surveys that Gallup sends out regarding many, many subjects. This is the one I received recently:
"Republicans' ratings of their lives worsened dramatically in November, while Democrats' ratings improved. The deep decline in Republicans' average Life Evaluation Index score was due entirely to their darkening outlook for their future."
So, here I site reading that comment this morning, and at the same time, I see this action of the stock market.
You can see in the chart above that since shortly after the election, the stock market has moved up persistently. Thankfully, our market analysis is based on the politically neutral Asset Allocation Model. That model has been saying recently, as we've mentioned several times, that the short-term is "iffy," but the long-term odds (next 12 months) are in our favor. So...the problems that are being heralded from coast to coast are still there, but despite the interpretation of these problems from either side of the aisle, the stock market is acting very, very good.
At the same time, take a look at the longer-term S&P 500 chart.
You can see above that we hit that same level as was reached on the short-term top of 2008 early this year. That was resistance, and the market did correct exactly at that peak point into the May to June correction. From that level, it then broke above the resistance in the rally that peaked in September of this year. The next move up "should" be have no resistance in that mirror image of 2007-2008, so based on this theory, the next stopping point in this rally should be that peak of 2007 - or 1576. But realistically, does this make sense?
Only time will tell, but as we approach the end of this year and the beginning of next year, we believe that our model is telling us that 2013 will be a good year for the stock market.
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