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Real Time Insight

2013 exploded out of the gates because PMs felt a new-found freedom to get fully invested. They didn't have to worry about Europe, China, or Washington anymore and could just focus on our 3 primary tailwinds: earnings, the economy, and the steady Fed.

By the second quarter, I was starting to feel like we were back in the late 1990s. Many people want to complain about this bubble or that bubble and say that the market is more like 1999 than 1995. I smile at that as I smell opportunity.

And last night I found some interesting historical evidence which argues (via momentum precedents and probability) for a growth and multiple-expansion rally right into next year.

I borrow this data from the blog of Scott Krisiloff, CFA who is Chief Investment Officer of Avondale Asset Management, a Los Angeles based investment firm, which manages investment accounts for individuals and institutions. I'll let Scott introduce his work verbatim...

"Below is a list of all the times that the S&P 500 has risen by more than 10% in the first 10 months of the year.  On average the index has risen by another 4.5% over the final two months.  Of the 24 times that this has happened, the index has only fallen in three years, and in those years it has never fallen by more than 70 bps.  On the other hand there have also been some monster finishes within the data.  In 1985 and 1998 the index was up by more than 11% in the final two months."



As you can see, our own little 2013 ranks 5th in terms of "first 10 months" performance. With all else we have going for us, including what is bound to be another record quarter of corporate profits in Q4, is there any reason not to be bullish for the next 2-3 months?

By the way, if I jinx this, please know that Mr. Market has already thought a few moves ahead of everyone and will be fooling the people who try to fade this trend. Heck, he'll probably fool many of the bulls too who get caught selling (instead of buying) on down days.

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