Don Hays: Near Perfect Conditions Suggest 30% Rally for Stocks in Next 12 Months (DIA, SPY, QQQ)
“Courage is resistance to fear, mastery of fear, not the absence of fear,” Mark Twain once said. For investors, Twain’s words seem particularly timely right now, given the transitioning state of unease that has been gripping the stock market for the first full week of the post-QE3 era. In fact, if you talk to veteran strategist Don Hays, of Hays Advisory in Nashville, he’ll say that what we need right now is a little more fear and the conditions would be absolutely perfect.
“We’ve looked at the last 50 years, and when you have conditions very similar to today — with monetary policy extremely positive, valuations extremely positive, and psychology a little queasy here — you still have very high odds that in the next 12 months you’re going to make money,” Hays says in the attached video.
In fact, 50 years of analyzing these three variables has shown that when they do all line up, there’s an 84% chance that stocks will be higher in the next 12 months by an average of 26%.
If he’s right, by this time next year the S&P 500 would be on its way to topping 1900, firmly in record territory. It’s why, in a recent note to clients, Hays described himself as being “long-term very bullish, but short-term hanging in there.” While he’s not predicting a washout in stock on the level of what we saw in 2010 and 20111, he does think the next few months will be tough and could see as much as a 10% decline.
You can see the full “Breakout” interview below:
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