I've been of the mind that the markets still had a ways to run upwards. My thinking was that there was no specific catalysing event that would cause a re-valuation, so things would just keep melting up for a while. This article is making me wonder if we've just hit peak "irrational exuberance": https://www.morningstar.com/articles/1058453/13-stocks-you-think-you-should-sell-but-shouldnt How can someone sleep at night telling people to hold those companies this price point? Look at Ringcentral they've been showing increasing losses even with increasing revenue... for a video conferencing company. They should already be killing it. What is the bull case there, their revenue goes up again and the figure out how to lose even more money? Or look at some of her other items, like resort companies at a P/E of over 100? Or investing in a foreign branch of Coke at 138 P/E? I'm starting to wonder if we hit a point where people look at the meagre returns for remaining invested, vs the potential for a 100% loss and decide to flee the stock market. I'm starting to look into bonds. I don't feel like we've quite hit the days of pets.com, but an SP500 index fund is looking pretty unappealing these days. Anyone have thoughts they're willing to share on when it's time to grab the chips off the table and walk away for a year? Pull out at SP500 PE of 45? Do people just have stop loss orders that they trust will be executed?
Agreed that a big drop is around the corner, a sense that the bullish crowd is milking the last drops from this market before the music stops. I'm working on finishing the year in positive territory, switch everything to cash at year end and sit out Q1, hoping to time the crash right...
Your ideas are like saying Lamborghini's are expensive so I don't want a car I think I'll take the bus or use Ubers. And shouldn't everyone sell their cars like me ? Meanwhile, some of us will buy a decently priced new car as a 10 year plan because we hate buses, or lease a car for 4-5 years. Of course, we'd have to research before we purchase and look for value not obsess about how expensive luxury or top end sports cars are. Seriously, it's an economic recovery not nearly done and cyclicals tend to do really well in these environments. Bonds usually lose money in rising interest rate environments. I suppose you could buy GICs but best I could find was 1.1% these days here and there are many quality stocks paying 3-6% dividends still.
Economic recovery not nearly done? Probably true for the real economy, but surely the broad stock market is now priced way higher than pre-covid.
The FED is the stock market. As long as they are buying and backstopping everything just keep buying with them. Hard to see a crash when we can’t even have a down 5% move without it getting panic bought right back to all time highs within the same week.
There is no profit in calling tops or bottoms. What to do at the price levels we're at right now is surely dependent on your holding time horizon. If you hold company shares and expect to sell them in decades from now, there is no reason to sell this week. If you're trading shares or taking a bullish position on a stock index, then you should already have got into cash early in the month. But actually there's an argument for getting back in now.
I say no we do not have reached the top, because TINA. In a stagflation guaranteed returns are scarce. Bonds don't yield as much as a FAANG equity.
Equity indices will keep on rising at least until allocators are indifferent to holding them versus bonds at minimal or negative real yields - and then they'll keep rising for a while from there based on inertia, speculative fervor on single names, and all those millions of automatic 401k contributions, etc. I think the base case fair value for equity indices is a PE of 50x, with a bull case of 100x - assuming no inflation shock or change to the rates environment.
Of course the longer the bull market goes on AND higher up it moves, the closer we get to a top. But "Timing is everything." The FAANGS and other MegaCaps, not Ringcentral, are what is holding the markets up. When the 2000 Nasdaq Y2K Tech Wreck finally broke it sure wasn't Pets.Com that was the cause.