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I was looking at a chart of the results of the Dow Jones Industrial Average and the S&P 500 Average. Most years it reached a new high. I could just hear the financial media complaining that the stock market at that date was too high and complain that there was no reason why stocks were doing so well. People listened, bailed out and tried to get back in at the bottom. (Most missed it). Then after a correction, the market again reached new high and the financial media raised the alarm and said that the stock market could not hold these record highs.
This was happening in the 1970s, 80s, 90s, 00s, and today. Why do people keep listening to this noise? The over all trend in the stock market is always up.
Oh, boy. Now you've done it. We have an entire bitter culture here who have been predicting/wishing that the up trend reverses forever so they can hide in a house built of high interest rate CDs and fortified with precious metals.
I think you have it wrong. The market does what ever it does for the day. Then the media reach into their basket of explanations (only one basket, not one for lows and one for highs) and pull out today's explanation.
I was looking at a chart of the results of the Dow Jones Industrial Average and the S&P 500 Average. Most years it reached a new high. I could just hear the financial media complaining that the stock market at that date was too high and complain that there was no reason why stocks were doing so well. People listened, bailed out and tried to get back in at the bottom. (Most missed it). Then after a correction, the market again reached new high and the financial media raised the alarm and said that the stock market could not hold these record highs.
This was happening in the 1970s, 80s, 90s, 00s, and today. Why do people keep listening to this noise? The over all trend in the stock market is always up.
There are two groups of people who are worried about the market hitting new highs.
The dumb group just sees new highs being made almost every day and panics thinking this can't go on. Of course it can, if the fundamentals like earnings, and macro events (e.g. no major terrorist incidents) are OK.
The smart group is worried because irrespective of the absolute level, the market IS overvalued based on metrics like the Shiller CAPE ratio (even after adjusting for various factors.) They are right. But what does that predict? That there could be a sharp brief correction, or stocks could wander around not making much money over the years, or growth could take off again making valuations reasonable. Who knows!
Keep in mind S&P is at something like 25x and earnings have been declining. So even ignoring all the financial media, it is not a bad idea to have a little bit of cash on the sidelines, just in case.
In late 2012 and early 2013 the PE Ratio was also high and the market started moving up into what became a huge bull market. If you got bogged down with the outdated idea what the PE Ratio should be in late 2012, you would have lost the 40% increase in the stock market from 2012 to today. How is it any different today than early 2013 when the market was at an all time high?
In late 2012 and early 2013 the PE Ratio was also high and the market started moving up into what became a huge bull market. If you got bogged down with the outdated idea what the PE Ratio should be in late 2012, you would have lost the 40% increase in the stock market from 2012 to today. How is it any different today than early 2013 when the market was at an all time high?
PE ratio is an indicator, not a predictor. I clearly said we don't know what the market will do. So one example of 2012-2013 to now proves nothing.
P/E reached 50 in 1999. You could argue with me the same thing if I said in 1998 that the market was overvalued. Bubbles can keep expanding for a long time. Nonetheless, you'd have been better off not investing in the 1999 market.
In the end, difference of opinion is what makes horse racing. And a stock market.
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OP can listen to me.
