I like to observe the action of the Russell 2000 Index as an omen of what is happening economically. The Russell 2000 is an index used as the performance measuring index for most small or mid-cap growth money managers. It is composed of 2000 of those types of stocks.
Last week it made a new all-time record high. The prior high had been made early in 2011, and it then suffered pretty deeply in that 2011 "correction" as economic concerns were growing worldwide. This is very significant in my mind.
We also like the recent action in the very pro-growth Dow Transports. Like the Russell 2000 Index shown before, the Dow Transports had serious and deep corrections in 2011, as the economic conditions were imperiled by Japan, China and many, many more countries abroad, but the strong action last week is a good omen that economic conditions in the next one year will show very good results.
These are exciting times as the evolution in the stock market continues. Recent years have brought strife and hard times, but as you are well aware, hard times force change, even when long-held core mindsets do not encourage it. In my opinion, I can almost guarantee you that the next decade will look NOTHING like most of us envision, and certainly not like the "herd" envisions. We believe the stock market is painting a much happier ending to this story than generally believed.
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