Breakout

Why a Downbeat America Is Bullish for Stocks

Breakout

When it comes to Mick Jagger and the Rolling Stones, satisfaction, or more specifically, the inability to get it, was a problem worthy of becoming an angry anthem.

When it comes to the stock market, however, the chairman of Hays Advisory Group says the current lack of satisfaction in this country is also worth singing about.

As Don Hays explains in the attached video, new polling data might sound depressing but it’s really something to cheer about.

“The Gallup (U.S. Satisfaction) poll is really, strangely enough, one of the better market indicators of the secular and even the cyclical (long-term) bull market,” he says, before noting that the recent 20% reading, while up a slightly, ‘’remains one of the lowest readings in last two years.”

View photo

.

Even so, Hays is near-term cautious of a climbing market that he calls ”a little cloudy,” but not enough to fake him out of it.

“Anytime you see this, it’s like (Sir John) Templeton once told us, ‘bull markets start in a period of high desperation and high fear, and they end in euphoria.’”  “Today there is no way we have anything except desperation and fear, and maybe a tidbit of hope.”

Add it all up and this former rocket scientist says we’re “somewhere in the mid-stages of the bull market,’’ which in numerical terms, implies about 20% upside to the S&P 500 (^GSPC) via an expanding P/E (price to earnings) ratio which he thinks should be at 17 times estimated earnings, instead of the current 15.

“Today, some of the traders are getting a little bit too optimistic, so that’s why we’re saying the short-term is a little cloudy,” he says.  “By the same token, the long-term trends, like this Gallup poll, show most people are very risk (averse) and they’re keeping their powder dry.”

And that’s the key, he says, since the short-term is admittedly unpredictable and not that important.

“When (people) start to bring that powder to the stock market, that’s when you have to start worrying about a topping phase,” he says, soothingly adding “we’re a long way from being there.”

View Comments (101)