With a few DGI members moving to a larger cash position, and quite a few comments mentioning that the market is overvauled. It made me begin to wonder? Is the market overvauled? Are we due for a market correction? A recession? Or something worse?
I would say aside from something horrible happening "Or something worse?" can be removed from the thought of "What's going to happen?"
What do we know? Inflation came down and is now kind of stuck in place--so it's sticky, the consumer is not happy but is not panicking, the housing market is not great--why would it be?? Lot's of people have that really low (me too at 3.3%) mortgage and is no way going to trade up to that 7% plus mortgage unless forced into it--Blame the Fed! They created those LOW RATES, and now people are upset with 7% mortgage rates?? Have to live with the times, my first mortgage was 7.75%. Lot's of high flying stocks but it's not a stock market it's a market of stocks, so we have that to go on as an investor. Oh, and it's an election year.
Does all of this or any of it constitute moving to cash? To sit on the sidelines? And for how long? And more importantly "When to get back in from the sidelines?"
I went back to the middle of 2016 within my own portfolio
I looked at 94 months
30 months in the Red, with 3 being the most consecutive Red months (it's happened twice)
64 months in the Green, with 10 being the most consecutive Green months (it's happened once, another time is was 9)
So, looking at my portfolio the market goes up more often than down--which history has proven this to be fact. We can go back to 1928, the stock market has grown on average 9.8% per year, and that includes the Great Depression.
But who cares what the market has done yesterday when we care about not today, but tomorrow??
But what do we know about tomorrow?
Over time, we know the stock market is going to go up--we do know that much.
But why? Because, the economy grows, corporations make more money and when that happens stock prices in theory should increase.
But are corporations going to make more money and how? Through productivity and cutting costs.
Which brings me to technology.
A big part of this stock market gain has been through a few tech companies that are now viewed as overvalued, making some think the market as a whole is overvalued...
Or is it? Is the market overvalued? Are these Tech companies in the midst of a AI revolution really overvalued?
Or are they going to make more money through organic and inorganic growth? Due to this technolgy.
I wish I had an answer, but something tells me we might not be as overvalued as some think the market to be, or for that matter tech.
I do know, looking at my portfolio I'm in the midst of 5 plus months of green, history says we're closer to a red month, possibly, well, with every green day we're getting closer to a red month for sure. Once the red month comes, maybe two or three consecutive red months going back to 2016, so one has 90 days on average to get back into the market.
But what about a year like 2022? 2022 was a mess! Was there a right time to get back into the market?
2022 had 7 months of Red with only 2 consecutive red months in a row, it happened twice that year. In a year like 2022, there is no good time to get back into the market other than little by little every week throughout the year. I say that because even though it's when we make the real money, it's gut wrenching, it's not easy.
So, why is it good to buy into the red? For tomorrow because tomorrow is historically green.
If one is going to buy and sell according to the red and green days...Man-oh-Man...I don't have an answer.
I would say aside from something horrible happening "Or something worse?" can be removed from the thought of "What's going to happen?"
What do we know? Inflation came down and is now kind of stuck in place--so it's sticky, the consumer is not happy but is not panicking, the housing market is not great--why would it be?? Lot's of people have that really low (me too at 3.3%) mortgage and is no way going to trade up to that 7% plus mortgage unless forced into it--Blame the Fed! They created those LOW RATES, and now people are upset with 7% mortgage rates?? Have to live with the times, my first mortgage was 7.75%. Lot's of high flying stocks but it's not a stock market it's a market of stocks, so we have that to go on as an investor. Oh, and it's an election year.
Does all of this or any of it constitute moving to cash? To sit on the sidelines? And for how long? And more importantly "When to get back in from the sidelines?"
I went back to the middle of 2016 within my own portfolio
I looked at 94 months
30 months in the Red, with 3 being the most consecutive Red months (it's happened twice)
64 months in the Green, with 10 being the most consecutive Green months (it's happened once, another time is was 9)
So, looking at my portfolio the market goes up more often than down--which history has proven this to be fact. We can go back to 1928, the stock market has grown on average 9.8% per year, and that includes the Great Depression.
But who cares what the market has done yesterday when we care about not today, but tomorrow??
But what do we know about tomorrow?
Over time, we know the stock market is going to go up--we do know that much.
But why? Because, the economy grows, corporations make more money and when that happens stock prices in theory should increase.
But are corporations going to make more money and how? Through productivity and cutting costs.
Which brings me to technology.
A big part of this stock market gain has been through a few tech companies that are now viewed as overvalued, making some think the market as a whole is overvalued...
Or is it? Is the market overvalued? Are these Tech companies in the midst of a AI revolution really overvalued?
Or are they going to make more money through organic and inorganic growth? Due to this technolgy.
I wish I had an answer, but something tells me we might not be as overvalued as some think the market to be, or for that matter tech.
I do know, looking at my portfolio I'm in the midst of 5 plus months of green, history says we're closer to a red month, possibly, well, with every green day we're getting closer to a red month for sure. Once the red month comes, maybe two or three consecutive red months going back to 2016, so one has 90 days on average to get back into the market.
But what about a year like 2022? 2022 was a mess! Was there a right time to get back into the market?
2022 had 7 months of Red with only 2 consecutive red months in a row, it happened twice that year. In a year like 2022, there is no good time to get back into the market other than little by little every week throughout the year. I say that because even though it's when we make the real money, it's gut wrenching, it's not easy.
So, why is it good to buy into the red? For tomorrow because tomorrow is historically green.
If one is going to buy and sell according to the red and green days...Man-oh-Man...I don't have an answer.
