I hope this title does not sound overly bold because I do not like when people make bold predictions to get attention. In fact, everyone that knows me understands I do not believe that anyone really knows the future. My style of investing is to try to understand the current trend, have a feeling for the current market psychology, understand market history, and then use my Magnet® Model to create and manage portfolios.
Back in the depths of the bear market of 2007-08, I was reading a newsletter from Hays Advisory that was talking about rebounds following bear markets. Their discussion was simple–historically, the deeper the bear market, the bigger the recovery. Bull markets historically produce a return of over 150% off the bottom of the preceding bear barket. Coming off severe bear markets and really tough economic periods, there have been four bull markets that have returned over 380%! While we were in the grips of “The Great Recession” and saw the Dow fall to 6500, I did a little math. Looking at the potential for another 300% return, I suggested we would see DOW 19,500 before the next big bull market ended. Believe it or not, we are almost there.
A new colleague of mine is running around saying, “DOW 20,000 is my target and I’m sticking with it!” He says it in a very bold way; but that target is only 14% higher than we are today. We have now entered the sweet spot of The Presidential Cycle: a nine-month period that is extremely historically favorable for the stock market. The shakeout in October created a reset for the market to now grind higher. I’ll remain less “attached” to my target for the market than my colleague. I’ll also stay “emotionally unattached” to any of my portfolio holdings along the way. As long as my holdings continue to rank highly on Magnet®, and show price momentum as well, they will stay in my portfolio. The market has a way of punishing those with a big ego and hubris. We’ll see some volatility along the way but I see a market that wants to continue to climb the Wall of Worry. Upside targets look good from here. Stay humble, but take what the market offers. This is what a bull market looks like.
Longs: Canadian Solar Inc. (CSIQ), China Mobile Games and Entertainment Group Limited (CMGE), Noah Holdings Limited (NOAH)
Shorts: Chico's FAS Inc. (CHS)
By Jordan Kimmel, Chief Investment Officer at Investview, Inc. (INVU).