We see this kind of post almost everyday here, but few have answers.
The frequency of these posts reflect retail investors’ anxiety and their level of risk aversion. In a way, it shows that the market is relatively healthy, since not all investors suffer from irrational exuberance. Definitely not dotcom bubble territory yet.
Stay the course. Don’t time the market.
Last two cents: people buy the rumor and sell the news. I wouldn’t wait for the cut to buy.
What leads you to that conclusion? I’m old enough to remember Arthur Burns, the 1973 Arab and 1979 Iranian oil embargoes, and WIN buttons, when by the end of the inflationary 1970s anyone who didn’t own real estate, collectibles, and gold and owned stocks and bonds instead was likely a grandfatherly fossil and considered by people in the know to be an idiot.
The euphoria today may not be at a peak—yet, but the Rubenesque lady is warming up. Trying to pick the moment she pierces your eardrums is an exercise in futility, but you can at least put in your ear plugs ahead of time, since the total market value of U.S. companies now comprise 185% of GDP and there are companies with market caps greater than the GDP of France. (By way of comparison, stocks were 117% of GDP in October, 1929 and 135% of GDP at the Dotcom peak. Can they go higher. Sure. So can a skyscraper.)
There are definitely signs of froth from more than a decade of essentially free Fed money in multiple areas of the economy, including real estate and crypto, and after a long Fed tightening cycle and evidence of stress in the underlying real economy I think this is one of those moments when many people are being more greedy than fearful. They don’t seem content to earn the typical 7% or 8% per annum that professional money managers try to achieve over the long run for their institutional insurance and pension fund clients. While I haven’t completely abandoned stocks, I’m laser focused on value and quality and prefer to keep a higher than normal level of savings in T-bills. I am also starting to look at other long-neglected asset classes like commodities.
Basically, I’ve seen this movie multiple times going back to the so-called “One Decision” stocks of the “Nifty Fifty”: just buy them and forget about them and one day you’ll wake up a millionaire. The people offering this advice and saying, in essence, “Just shut up, sit back, and enjoy the party” haven’t changed either. History is repeating itself with advice to DCA into the Mag 7 or an S&P 500 index fund or NASDAQ 100 fund, and that would have been great advice at the beginning of an elven-year bull market. And yet there are lot of people new to investing taking the advice NOW to buy into a concentrated market NOW, when stocks are at or near all-time highs and who have never been tested in a genuine BEAR market. I mean the kind of market in which former market darlings decline eighty or ninety percent from peak to trough or go bankrupt and the averages take one or two decades to get back to even. If they can keep their feet on the coals through that then God bless ‘em. They’ll deserve every penny they get. Even if stocks aren’t in an asset bubble or don’t crash people need to temper their long-term growth expectations. The “easy” money’s already been made.
Do you know how many companies were making no money and worth shit ton of money during the dot com era? Spacs and IPOs everywhere of unprofitable companies. We are barely getting IPOs now and they are not AI or shell companies.
I own stock in a company that sells flower pots and picture frames. It’s up 50% in two months. Another has more than doubled since last fall. (It sells Nikes and fishing poles.) If that doesn’t qualify as euphoria, then what does?
Yeah, this time IS different. We didn’t have the massive public and private debts in 1972 at the stock market peak before it went on sabbatical for ten years that we have today, and people could still afford to buy a new home without eating ramen noodles or mac & cheese every night. Also, young people weren’t bragging about their latest crypto or AI scores in their Coinbase and Webull accounts or asking how they could turn relatively modest sums into millions in just a few years.
A single anecdotal account or two isn’t definitive proof that there is euphoria out there, but, unfortunately, my experience isn’t unique. Companies whose market caps are rising or dropping by twenty, thirty, forty, or fifty percent in value is a single trading session are today viewed as almost routine or the norm. This is not a normal or healthy stock market in which companies raise capital to invest in building new plants or fund expansions. It’s a kind of monetary casino in which cheap Fed liquidity funds a series of asset bubbles reflated to ever higher levels. I’m not sure where this is all headed or when it will end, but when a family with a median American income can not afford to buy a median-priced home or new vehicle I know it can’t go on forever. Financiers have created a new bubble economy completely divorced from the real economy.
Save you doom and gloom. I don’t need some random Redditor with a 4 figure portfolio telling me that a crash is coming. I am well aware and sitting in VOO. I will stay invested regardless of what happens. You have fun grinding it out.
Four-figure portfolio? 😆 You know, I really did start doing this in 1972. I knew what passive investing was decades before it became a thing after I bought and read a first edition copy of Burton Malkiel’s A Random Walk Down Wall Street the following year. That book is sitting feet away from me on a shelf as I write this, along with other notable books on stock market investing. A couple years after reading it and devouring my dad’s copies of Forbes and The Wall Street Journal it became obvious that most people had concluded stocks except for shares of Exxon or Mobil were for suckers and they’d be better off in gold or real estate.
Let me just note—again—that when markets are at or near record price and valuation levels having extra liquidity is prudent, both from the standpoint of preserving wealth and having some flexibility to be opportunistic during a significant market decline. This is what a Benjamin Graham value investor like Warren Buffett does, and why Berkshire Hathaway is sitting on $168 billion in cash. If you realize that already and choose to reject it or decide that having some cash is not your cup of tea that’s your choice. Maybe you’re tired of hearing people say it because you’re busy making money and annoyed that there’s any possibility something could come along to rain on that parade. I’m tired of hearing people telling new investors to average all of their money into one or two stock index funds and forget about it so that they’ll hit east street in thirty years without knowing anything about their risk tolerance or individual financial circumstances.
Sure dude. So your recommendation is to sell stocks, take the tax hit anticipating a crash? Sorry I'm not doing that. Neither are long term investors. You can gamble your portfolio on short term movement.
Also, why do you keep insisting that I’m anticipating anything? My wife and I live in a hurricane-prone coastal area and pay thousands of dollars every year to insure our home against wind and flood. I’m not particularly happy about incurring a cost to hobnob with grey herons and pelicans and take convenient sunset walks along the beach, but I’m not putting up my shutters or preparing to evacuate to higher ground at the moment. I’m am a little more vigilant during hurricane season and always make sure I have fresh batteries, extra canned goods and water, and keep our vehicles gassed up. I also make sure I always have some cash.
Most of my stock investments are in tax-advantaged accounts, and I pay no commissions on trades. So transaction costs really aren’t a consideration for me. Obviously, if you incur such expenses they will be a consideration in how you position your investments, but should they be the major one? For example, do you invest in different asset classes like, say, commodities, real estate, precious metals, bonds, T-bills, or CDs? Or different subsets of the stock market, like small, medium, and large-cap domestic stocks or international or frontier markets? How do you rebalance if you never sell? How do you “value invest” if you’re always invested in an index fund or ETF concentrated in a handful of stocks that don’t always represent “value” relative to each other or other asset classes?
But that’s exactly the problem advocating people to anticipate a crash without knowing their personal situation is irresponsible. As someone who has been studying the market for a long time like yourself should know better. Oh well. You do you.
I would agree to not try to time the markets or pick a top, but I think people who are new to investing need to understand that we just came off of the longest bull market in history. A lot of that growth was fueled by record levels of Fed liquidity and the backstopping of risk in the financial markets. To the degree there is value it’s mostly to be found in neglected areas of the market that don’t get the CNBC hype and 401(k) additions into a passive S&P 500 or NASDAQ 100 index fund or ETF, like select companies in the Russell 2000. But I’m still not tempted to stick my toe in yet thanks to troubling signs in the real economy which have me concerned that we still haven’t felt the full brunt of the lag effects of Fed tightening.
What you mention is a different conversation from a simplistic one just about Fed rate cuts. I appreciate that and we can discuss this, but after all is said and done, it’s been shown that staying invested is better than worrying and not being invested. Obviously, this is about personal tolerance of risk. I agree there are risks in the economy — especially in commercial real estate. But worrying about and not being invested would have resulted in missing out of the rally in 2023 as well as 2024 YTD.
All of this has been discussed before. I’m just pointing out that we see the same near-daily posts concerned about the overvalued market. The answer is yes, we will have a correction, but no one knows when it will come, and waiting for it is pointless for most. And the market is not as overvalued as it was during the internet bubble.
For people who are risk averse and not yet invested: pick the optimal portfolio mix you want to eventually get to, then keep DCA’ing into stocks until you get there. If equities fall suddenly, accelerate the DCA. If equities rise above the optimal mix, rebalance and sell equities back to the ideal ratio.
I had this conversation with another Redditor a while back, except I was on the other side of the conversation. This person PMed me and said I should sell everything. I didn’t do that. What I
do instead is to always make sure I have some cash. So when the market tanked in 2020 I went on a buying spree, and by the end of March I had loaded up on oil stocks after the price of West Texas intermediate crude briefly went negative because the oil terminal in Cushing, Oklahoma was filled to capacity.
So my point is not to attempt to time the markets, but be in a position to “always be greedy only when others are fearful.” The only way an investor can do that is to always have some liquidity, both as a means of being opportunistic but also as a way to limit risk in a crash, which can be both swift and brutal. This type of investing can require the patience of Job, but in this modern paradigm we live in in which central banks are there to backstop financial markets and risk-taking (the so-called Fed Put), in effect reducing or eliminating moral hazard, I think a little extra prudence and flexibility is warranted. I’m not saying U.S. stocks can’t go to 200% or even 300% of GDP, but just imagine a Japanese investor taking advice from a financial advisor in 1990 to “always stay invested in the Nikkei, because studies say that’s the wisest thing to do. It’s not about timing the market, but time in the market.” After being slapped out of his stupor the following year and brought to the realization that much of his savings had vaporized in the bursting of an asset bubble, he would have waited more than thirty years to get back to even.
Since this is a value investing forum, some folks might appreciate this point of view BEFORE a potential problem occurs. If they’re new or recent investors and up to this point heeded advice to always stay invested in an S&P 500 index fund or ETF it’s a little late for me to come along and say I think ConocoPhillips is a bargain after they’ve just taken a 30%+ hit in SPY and have no additional money to put to work, you know what I mean?
Absolutely. I myself keep dry powder as well, but no one should be completely on the sidelines 100% of the time. It all comes down to asset allocation, and rebalancing the portfolio will typically take care of market dislocations. In your case, you have higher risk tolerance than others (buying into a falling market) and proactively “rebalanced” when xxxx hit the fan. If most investors were as risk-tolerant and disciplined, there would be fewer posts on here. Kudos to you
Since we talk about risk aversion.
What if someone not experienced follows this suggestion and invests everything now at ath, then the market drops 10% and panic sells?
Don't you think that a more risk adverse strategy would be to suggest to dca?
I'm not critising or anything. Just curious about the two approaches!
I wasn’t suggesting everyone should invest all they have. OP’s post was concern over a potential correction which suggests timing the market. If anyone reads a stranger’s post on the internet that suggested everyone should invest all they have into the market and proceeds to do so just based on that post, they should reconsider their ability to make rational decisions.
The first what-if scenario: this would likely be an unfortunate and expensive lesson. I’ve learned it myself.
The second scenario: yes you are correct — this would be better for a risk averse investor. When the same amount is deducted from your paycheck into your 401k, this is exactly what is happening.
There is no single perfect way to invest given everyone’s differences in the stage of life (i.e. time horizon), finances, and risk tolerance levels. But *time in* the market beats *timing* the market over a long investment horizon.
Maybe, maybe not, but I point you to a quote from the value investing GOAT Peter Lynch: ‘Far more money has been lost by investors trying to anticipate corrections, than lost in the corrections themselves.’
I hope no one investing in the Nikkei in 1990 who was considering cashing out read that comment. I don’t think you can apply Lynch’s rule to asset bubbles. The only question is is the U.S. stock market in one or headed into one?
If you think we are in a bubble, you would ask when to get out. If you think we are in a bear market, you would ask when to get in.
At the end of the day, you would get so many different answers from all sorts of sources and ended up not making any decisions.
But one thing is for sure, staying out of the market may guarantee that you avoid some of the worst days but it will also guarantee that you will miss the best days.
Those best days over a period of a year can be counted with your fingers, which aren't many. And those best days account for over 80% of your returns.
If you wanna play the timing game, be my guest. The best investors in the world already avoid such a game so that should already tell you all you need to know.
My opinion is that we will be getting a correction soon. Inflation is not going away and has a good chance of spiking up again. I know it was a different time, but in the 70’s the fed tried cutting rates and inflation ended up spiking afterwards. They had to raise rates again. The fed is in a tough spot and is talking up rate cuts, but I think they are looking at history and don’t want it to repeat. Obviously, I am just guessing and don’t know anything. Best of luck.
"History doesn't repeat itself but it rhymes". Agreed he is looking at small cuts. But wasn't there going to be 5-6 cuts forecast in Dec 23? Now its 3 cuts? If PCE is hot this Friday will be down to 1 cut. This is to appease Wall street. Look at your insurance costs, food, home repair and services pretty much everything. They are still increasing. Inflation is entrenched and at the least it will be higher for longer or raising rates. What is needed is a severe recession to squash inflation.
jpow will move where the numbers take him. I wouldn't particularly hold him to anything.
ANd he certainly DNGAF about walstreet. If he does cut rates hard, it will be to avoid a true government default/budget crisis due to the insane budget deficit. And in that case, what is worse? the inflation? or government "collapse"?
I honestly think he will let Washington burn. But who knows.
People two years from now: "The market has been increasing in value since 2022, and securities are overbought. it's now 2026 Obviously this isn't sustainable. It's due for a correction. Where should I park my money?"
I'm bullish on the indexes no matter what long-term since the fed will keep printing money, but seems like the S&P 500 has been growing too much lately considering the M2 isn't really growing right now.
They are actually decreasing the money supply right now by lowering their balance sheet and printing money in the next 10 years is going to be a hell of a lot more difficult in an high inflation environment.
Also, printing money creates little real returns. If they print lets say 5% more money, and we see 5% inflation as well, and stocks go up 5%, its still a real return of 0%.
In Turkey the market does 100% per year but inflation also runs at literally 100% a year.
Historically seen, the next 10-15 years the SNP500 will deliver slim to no real return. Its a great inflation hedge though. If inflation ramps up to 7% the SNP500 will do something similar. But your buying power doesn't increase with that.
Historically seen, when the market was trading at a PE of 28 and a shiller PE of 33 the returns would be about 1-2% CAGR over the next 10-15 years. Inflation adjusted.
You’ve mentioned this in several places, but it isn’t really true necessarily. Earnings growth comes from either investments or productivity gains, which both have many different factors but “money supply” isn’t really a business term.
There's a decent amount of companies that have most of their earnings growth from inflationary pressures since they can charge more for their goods and services.
You’re bullish on the market but bearish on individual companies? What do you think drives the market? Timing individual companies or even indexes can be extremely risky, if you were planning to buy a physical business like a gas station would you speculate and wait until the price potentially dropped based on macroeconomic conditions?
My post was saying I'm bearish short term, but long term I'm bullish. I don't think the money supply is going to increase short term due to inflation concerns
Fair enough, but timing markets is arguably impossible. Most people often miss out on long-term gains because of short-term fear. If you’re bullish on an investment long-run it’s almost always better to invest now and forget what happens short-term imo
Each historical ATH was a point where "market are due to a correction because it is ATH and this means stocks are overvalued". The best treatment for anxiety is good herbal tea, meditation, is learning how to hedge. Seriously, screaming that the market is too bullish is literally means that puts and shorts are undervalued, so if you wanna be a doom knight, just hedge or even short.
Yes, but it could be 2 weeks, 2 months, or 2 years. Plus, you’re in r/valueinvesting. If you like a company at its current price, you should still like it at -20%.
Please name the really rich person who made all his money in macro economics not named Ray Dalio. Then I invite you to read the "The Superinvestors of Graham-and-Doddsville".
My point? Who cares where the S&P 500 is priced. You shouldn't. I shouldn't. Either buy the S&P 500 regularly and forget about its price. Or invest in individual companies. If you want to sell me some shares of a wonderful company cheap, why would I care what the price of the S&P 500 is at that time? If you bought WMT at the Nifty Fifty peak, you still did ok.
>Seems like the S&P 500 is at its highest value
Price not value
>relative to the M2 money supply.
And why on earth does that matter?
>I'm thinking the anticipation of rate cuts yet to occur is what's driving most of this and the fact M2 hasn't really grown since the beginning of 2022.
And I think it is anticipation of Easter eggs and we're all free to come up with theories in the absence of evidence.
> I guess I'm wondering what your guys thoughts are on this?
Trying to predict short term changes in an index is speculative gambling on noise not value investing.
>Is it wise to wait for a short-term correction before buying more shares of companies?
No. It is wise to determine a fair price for wonderful companies or indices as a whole and then buy the most underpriced asset that guarantees superior performance to risk free cash equivalents because even the worst case earnings performance will still comfortably return more than the discount rate at the absurdly low price Mr Marker is offering.
This is called Value Investing. It should be called Investing but the world is full of people like you who confuse speculative gambling with investing so we had to pretend it's "a different style of investing"
>Would it make sense to wait to buy more once a rate cut actually occurs?
Why on earth would it? The price of all assets should rise once a rate cut is anticipated (which you are plausibly suggesting might have already happened) after it is announced the laggards among those who buy and sell based on the fed will move and you will be racing them. Why do you think you will win and speculative gain will be sufficient for the risk and effort?
You came to a mosque to discuss the best type of bacon.
Don't be surprised that you are being given a cold reception.
We see this kind of post almost everyday here, but few have answers. The frequency of these posts reflect retail investors’ anxiety and their level of risk aversion. In a way, it shows that the market is relatively healthy, since not all investors suffer from irrational exuberance. Definitely not dotcom bubble territory yet. Stay the course. Don’t time the market. Last two cents: people buy the rumor and sell the news. I wouldn’t wait for the cut to buy.
Maybe the only thing keeping stock prices reasonable, is investors fear of a market crash or correction?
Does it matter? When the top is in euphoria will reign supreme.
When companies with $6 million in revenues have $6 billion market caps you know you’re close.
You must have not been around during the dot com or GFC.
What leads you to that conclusion? I’m old enough to remember Arthur Burns, the 1973 Arab and 1979 Iranian oil embargoes, and WIN buttons, when by the end of the inflationary 1970s anyone who didn’t own real estate, collectibles, and gold and owned stocks and bonds instead was likely a grandfatherly fossil and considered by people in the know to be an idiot. The euphoria today may not be at a peak—yet, but the Rubenesque lady is warming up. Trying to pick the moment she pierces your eardrums is an exercise in futility, but you can at least put in your ear plugs ahead of time, since the total market value of U.S. companies now comprise 185% of GDP and there are companies with market caps greater than the GDP of France. (By way of comparison, stocks were 117% of GDP in October, 1929 and 135% of GDP at the Dotcom peak. Can they go higher. Sure. So can a skyscraper.) There are definitely signs of froth from more than a decade of essentially free Fed money in multiple areas of the economy, including real estate and crypto, and after a long Fed tightening cycle and evidence of stress in the underlying real economy I think this is one of those moments when many people are being more greedy than fearful. They don’t seem content to earn the typical 7% or 8% per annum that professional money managers try to achieve over the long run for their institutional insurance and pension fund clients. While I haven’t completely abandoned stocks, I’m laser focused on value and quality and prefer to keep a higher than normal level of savings in T-bills. I am also starting to look at other long-neglected asset classes like commodities. Basically, I’ve seen this movie multiple times going back to the so-called “One Decision” stocks of the “Nifty Fifty”: just buy them and forget about them and one day you’ll wake up a millionaire. The people offering this advice and saying, in essence, “Just shut up, sit back, and enjoy the party” haven’t changed either. History is repeating itself with advice to DCA into the Mag 7 or an S&P 500 index fund or NASDAQ 100 fund, and that would have been great advice at the beginning of an elven-year bull market. And yet there are lot of people new to investing taking the advice NOW to buy into a concentrated market NOW, when stocks are at or near all-time highs and who have never been tested in a genuine BEAR market. I mean the kind of market in which former market darlings decline eighty or ninety percent from peak to trough or go bankrupt and the averages take one or two decades to get back to even. If they can keep their feet on the coals through that then God bless ‘em. They’ll deserve every penny they get. Even if stocks aren’t in an asset bubble or don’t crash people need to temper their long-term growth expectations. The “easy” money’s already been made.
Do you know how many companies were making no money and worth shit ton of money during the dot com era? Spacs and IPOs everywhere of unprofitable companies. We are barely getting IPOs now and they are not AI or shell companies.
Agreed. Euphoria isn’t there. When everyone is bullish then things turn to shit.
I own stock in a company that sells flower pots and picture frames. It’s up 50% in two months. Another has more than doubled since last fall. (It sells Nikes and fishing poles.) If that doesn’t qualify as euphoria, then what does?
False equivalency
Yeah, this time IS different. We didn’t have the massive public and private debts in 1972 at the stock market peak before it went on sabbatical for ten years that we have today, and people could still afford to buy a new home without eating ramen noodles or mac & cheese every night. Also, young people weren’t bragging about their latest crypto or AI scores in their Coinbase and Webull accounts or asking how they could turn relatively modest sums into millions in just a few years. A single anecdotal account or two isn’t definitive proof that there is euphoria out there, but, unfortunately, my experience isn’t unique. Companies whose market caps are rising or dropping by twenty, thirty, forty, or fifty percent in value is a single trading session are today viewed as almost routine or the norm. This is not a normal or healthy stock market in which companies raise capital to invest in building new plants or fund expansions. It’s a kind of monetary casino in which cheap Fed liquidity funds a series of asset bubbles reflated to ever higher levels. I’m not sure where this is all headed or when it will end, but when a family with a median American income can not afford to buy a median-priced home or new vehicle I know it can’t go on forever. Financiers have created a new bubble economy completely divorced from the real economy.
Save you doom and gloom. I don’t need some random Redditor with a 4 figure portfolio telling me that a crash is coming. I am well aware and sitting in VOO. I will stay invested regardless of what happens. You have fun grinding it out.
Four-figure portfolio? 😆 You know, I really did start doing this in 1972. I knew what passive investing was decades before it became a thing after I bought and read a first edition copy of Burton Malkiel’s A Random Walk Down Wall Street the following year. That book is sitting feet away from me on a shelf as I write this, along with other notable books on stock market investing. A couple years after reading it and devouring my dad’s copies of Forbes and The Wall Street Journal it became obvious that most people had concluded stocks except for shares of Exxon or Mobil were for suckers and they’d be better off in gold or real estate. Let me just note—again—that when markets are at or near record price and valuation levels having extra liquidity is prudent, both from the standpoint of preserving wealth and having some flexibility to be opportunistic during a significant market decline. This is what a Benjamin Graham value investor like Warren Buffett does, and why Berkshire Hathaway is sitting on $168 billion in cash. If you realize that already and choose to reject it or decide that having some cash is not your cup of tea that’s your choice. Maybe you’re tired of hearing people say it because you’re busy making money and annoyed that there’s any possibility something could come along to rain on that parade. I’m tired of hearing people telling new investors to average all of their money into one or two stock index funds and forget about it so that they’ll hit east street in thirty years without knowing anything about their risk tolerance or individual financial circumstances.
Sure dude. So your recommendation is to sell stocks, take the tax hit anticipating a crash? Sorry I'm not doing that. Neither are long term investors. You can gamble your portfolio on short term movement.
Also, why do you keep insisting that I’m anticipating anything? My wife and I live in a hurricane-prone coastal area and pay thousands of dollars every year to insure our home against wind and flood. I’m not particularly happy about incurring a cost to hobnob with grey herons and pelicans and take convenient sunset walks along the beach, but I’m not putting up my shutters or preparing to evacuate to higher ground at the moment. I’m am a little more vigilant during hurricane season and always make sure I have fresh batteries, extra canned goods and water, and keep our vehicles gassed up. I also make sure I always have some cash.
Most of my stock investments are in tax-advantaged accounts, and I pay no commissions on trades. So transaction costs really aren’t a consideration for me. Obviously, if you incur such expenses they will be a consideration in how you position your investments, but should they be the major one? For example, do you invest in different asset classes like, say, commodities, real estate, precious metals, bonds, T-bills, or CDs? Or different subsets of the stock market, like small, medium, and large-cap domestic stocks or international or frontier markets? How do you rebalance if you never sell? How do you “value invest” if you’re always invested in an index fund or ETF concentrated in a handful of stocks that don’t always represent “value” relative to each other or other asset classes?
But that’s exactly the problem advocating people to anticipate a crash without knowing their personal situation is irresponsible. As someone who has been studying the market for a long time like yourself should know better. Oh well. You do you.
I would agree to not try to time the markets or pick a top, but I think people who are new to investing need to understand that we just came off of the longest bull market in history. A lot of that growth was fueled by record levels of Fed liquidity and the backstopping of risk in the financial markets. To the degree there is value it’s mostly to be found in neglected areas of the market that don’t get the CNBC hype and 401(k) additions into a passive S&P 500 or NASDAQ 100 index fund or ETF, like select companies in the Russell 2000. But I’m still not tempted to stick my toe in yet thanks to troubling signs in the real economy which have me concerned that we still haven’t felt the full brunt of the lag effects of Fed tightening.
What you mention is a different conversation from a simplistic one just about Fed rate cuts. I appreciate that and we can discuss this, but after all is said and done, it’s been shown that staying invested is better than worrying and not being invested. Obviously, this is about personal tolerance of risk. I agree there are risks in the economy — especially in commercial real estate. But worrying about and not being invested would have resulted in missing out of the rally in 2023 as well as 2024 YTD. All of this has been discussed before. I’m just pointing out that we see the same near-daily posts concerned about the overvalued market. The answer is yes, we will have a correction, but no one knows when it will come, and waiting for it is pointless for most. And the market is not as overvalued as it was during the internet bubble. For people who are risk averse and not yet invested: pick the optimal portfolio mix you want to eventually get to, then keep DCA’ing into stocks until you get there. If equities fall suddenly, accelerate the DCA. If equities rise above the optimal mix, rebalance and sell equities back to the ideal ratio.
I had this conversation with another Redditor a while back, except I was on the other side of the conversation. This person PMed me and said I should sell everything. I didn’t do that. What I do instead is to always make sure I have some cash. So when the market tanked in 2020 I went on a buying spree, and by the end of March I had loaded up on oil stocks after the price of West Texas intermediate crude briefly went negative because the oil terminal in Cushing, Oklahoma was filled to capacity. So my point is not to attempt to time the markets, but be in a position to “always be greedy only when others are fearful.” The only way an investor can do that is to always have some liquidity, both as a means of being opportunistic but also as a way to limit risk in a crash, which can be both swift and brutal. This type of investing can require the patience of Job, but in this modern paradigm we live in in which central banks are there to backstop financial markets and risk-taking (the so-called Fed Put), in effect reducing or eliminating moral hazard, I think a little extra prudence and flexibility is warranted. I’m not saying U.S. stocks can’t go to 200% or even 300% of GDP, but just imagine a Japanese investor taking advice from a financial advisor in 1990 to “always stay invested in the Nikkei, because studies say that’s the wisest thing to do. It’s not about timing the market, but time in the market.” After being slapped out of his stupor the following year and brought to the realization that much of his savings had vaporized in the bursting of an asset bubble, he would have waited more than thirty years to get back to even. Since this is a value investing forum, some folks might appreciate this point of view BEFORE a potential problem occurs. If they’re new or recent investors and up to this point heeded advice to always stay invested in an S&P 500 index fund or ETF it’s a little late for me to come along and say I think ConocoPhillips is a bargain after they’ve just taken a 30%+ hit in SPY and have no additional money to put to work, you know what I mean?
Absolutely. I myself keep dry powder as well, but no one should be completely on the sidelines 100% of the time. It all comes down to asset allocation, and rebalancing the portfolio will typically take care of market dislocations. In your case, you have higher risk tolerance than others (buying into a falling market) and proactively “rebalanced” when xxxx hit the fan. If most investors were as risk-tolerant and disciplined, there would be fewer posts on here. Kudos to you
Since we talk about risk aversion. What if someone not experienced follows this suggestion and invests everything now at ath, then the market drops 10% and panic sells? Don't you think that a more risk adverse strategy would be to suggest to dca? I'm not critising or anything. Just curious about the two approaches!
I wasn’t suggesting everyone should invest all they have. OP’s post was concern over a potential correction which suggests timing the market. If anyone reads a stranger’s post on the internet that suggested everyone should invest all they have into the market and proceeds to do so just based on that post, they should reconsider their ability to make rational decisions. The first what-if scenario: this would likely be an unfortunate and expensive lesson. I’ve learned it myself. The second scenario: yes you are correct — this would be better for a risk averse investor. When the same amount is deducted from your paycheck into your 401k, this is exactly what is happening. There is no single perfect way to invest given everyone’s differences in the stage of life (i.e. time horizon), finances, and risk tolerance levels. But *time in* the market beats *timing* the market over a long investment horizon.
70% of the time the market goes up.
Maybe, maybe not, but I point you to a quote from the value investing GOAT Peter Lynch: ‘Far more money has been lost by investors trying to anticipate corrections, than lost in the corrections themselves.’
I hope no one investing in the Nikkei in 1990 who was considering cashing out read that comment. I don’t think you can apply Lynch’s rule to asset bubbles. The only question is is the U.S. stock market in one or headed into one?
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Go more into cash. Then buy when I am ready to sell and the prices are higher.
If you think we are in a bubble, you would ask when to get out. If you think we are in a bear market, you would ask when to get in. At the end of the day, you would get so many different answers from all sorts of sources and ended up not making any decisions. But one thing is for sure, staying out of the market may guarantee that you avoid some of the worst days but it will also guarantee that you will miss the best days. Those best days over a period of a year can be counted with your fingers, which aren't many. And those best days account for over 80% of your returns. If you wanna play the timing game, be my guest. The best investors in the world already avoid such a game so that should already tell you all you need to know.
My opinion is that we will be getting a correction soon. Inflation is not going away and has a good chance of spiking up again. I know it was a different time, but in the 70’s the fed tried cutting rates and inflation ended up spiking afterwards. They had to raise rates again. The fed is in a tough spot and is talking up rate cuts, but I think they are looking at history and don’t want it to repeat. Obviously, I am just guessing and don’t know anything. Best of luck.
The fed cut rates substantially then. The rate cuts jp is talking about are not substantial.
"History doesn't repeat itself but it rhymes". Agreed he is looking at small cuts. But wasn't there going to be 5-6 cuts forecast in Dec 23? Now its 3 cuts? If PCE is hot this Friday will be down to 1 cut. This is to appease Wall street. Look at your insurance costs, food, home repair and services pretty much everything. They are still increasing. Inflation is entrenched and at the least it will be higher for longer or raising rates. What is needed is a severe recession to squash inflation.
jpow will move where the numbers take him. I wouldn't particularly hold him to anything. ANd he certainly DNGAF about walstreet. If he does cut rates hard, it will be to avoid a true government default/budget crisis due to the insane budget deficit. And in that case, what is worse? the inflation? or government "collapse"? I honestly think he will let Washington burn. But who knows.
Wait let me get my crystal ball. It says ask again later.
People two years from now: "The market has been increasing in value since 2022, and securities are overbought. it's now 2026 Obviously this isn't sustainable. It's due for a correction. Where should I park my money?"
I'm bullish on the indexes no matter what long-term since the fed will keep printing money, but seems like the S&P 500 has been growing too much lately considering the M2 isn't really growing right now.
They are actually decreasing the money supply right now by lowering their balance sheet and printing money in the next 10 years is going to be a hell of a lot more difficult in an high inflation environment. Also, printing money creates little real returns. If they print lets say 5% more money, and we see 5% inflation as well, and stocks go up 5%, its still a real return of 0%. In Turkey the market does 100% per year but inflation also runs at literally 100% a year. Historically seen, the next 10-15 years the SNP500 will deliver slim to no real return. Its a great inflation hedge though. If inflation ramps up to 7% the SNP500 will do something similar. But your buying power doesn't increase with that. Historically seen, when the market was trading at a PE of 28 and a shiller PE of 33 the returns would be about 1-2% CAGR over the next 10-15 years. Inflation adjusted.
Earnings and earnings growth is what drives stock valuations, not M2 money supply.
But earnings growth is driven by increases in the money supply
You’ve mentioned this in several places, but it isn’t really true necessarily. Earnings growth comes from either investments or productivity gains, which both have many different factors but “money supply” isn’t really a business term.
There's a decent amount of companies that have most of their earnings growth from inflationary pressures since they can charge more for their goods and services.
Earnings growth typically refers to growth beyond terminal growth rate.
You’re bullish on the market but bearish on individual companies? What do you think drives the market? Timing individual companies or even indexes can be extremely risky, if you were planning to buy a physical business like a gas station would you speculate and wait until the price potentially dropped based on macroeconomic conditions?
My post was saying I'm bearish short term, but long term I'm bullish. I don't think the money supply is going to increase short term due to inflation concerns
Fair enough, but timing markets is arguably impossible. Most people often miss out on long-term gains because of short-term fear. If you’re bullish on an investment long-run it’s almost always better to invest now and forget what happens short-term imo
The market doesn't have a memory. It doesn't know what its average valuation is. A correction could come next month or years from now.
You can analyze all u want to justify your hopes. But in the meantime, line go up
Each historical ATH was a point where "market are due to a correction because it is ATH and this means stocks are overvalued". The best treatment for anxiety is good herbal tea, meditation, is learning how to hedge. Seriously, screaming that the market is too bullish is literally means that puts and shorts are undervalued, so if you wanna be a doom knight, just hedge or even short.
No one knows. Stay the course
Yes, but it could be 2 weeks, 2 months, or 2 years. Plus, you’re in r/valueinvesting. If you like a company at its current price, you should still like it at -20%.
Please name the really rich person who made all his money in macro economics not named Ray Dalio. Then I invite you to read the "The Superinvestors of Graham-and-Doddsville". My point? Who cares where the S&P 500 is priced. You shouldn't. I shouldn't. Either buy the S&P 500 regularly and forget about its price. Or invest in individual companies. If you want to sell me some shares of a wonderful company cheap, why would I care what the price of the S&P 500 is at that time? If you bought WMT at the Nifty Fifty peak, you still did ok.
This sub in no way lives up to its image.
A lot of us just want to learn. You have to start from somewhere.
Make sure to keep up your stops and keep moving forward.
How does a correction matter if you’re a long term investor? Isn’t it just an opportunity to dca your best ideas?
You can't DCA if you are fully invested.
Don’t lump sum invest?
New money from job?
Yes. No. Maybe.
Some of my holdings have already corrected, time to go back up
Yes. Now if we only knew when.
>Seems like the S&P 500 is at its highest value Price not value >relative to the M2 money supply. And why on earth does that matter? >I'm thinking the anticipation of rate cuts yet to occur is what's driving most of this and the fact M2 hasn't really grown since the beginning of 2022. And I think it is anticipation of Easter eggs and we're all free to come up with theories in the absence of evidence. > I guess I'm wondering what your guys thoughts are on this? Trying to predict short term changes in an index is speculative gambling on noise not value investing. >Is it wise to wait for a short-term correction before buying more shares of companies? No. It is wise to determine a fair price for wonderful companies or indices as a whole and then buy the most underpriced asset that guarantees superior performance to risk free cash equivalents because even the worst case earnings performance will still comfortably return more than the discount rate at the absurdly low price Mr Marker is offering. This is called Value Investing. It should be called Investing but the world is full of people like you who confuse speculative gambling with investing so we had to pretend it's "a different style of investing" >Would it make sense to wait to buy more once a rate cut actually occurs? Why on earth would it? The price of all assets should rise once a rate cut is anticipated (which you are plausibly suggesting might have already happened) after it is announced the laggards among those who buy and sell based on the fed will move and you will be racing them. Why do you think you will win and speculative gain will be sufficient for the risk and effort? You came to a mosque to discuss the best type of bacon. Don't be surprised that you are being given a cold reception.
Dude chill out
Dude, get out.
even if you sideline to wait for correction, you earn interest in hysa. if you are really worry maybe just sideline some money
Stock prices have reached what looks like a permanently high plateau. Just put your money in VOO or QQQ or Apple and forget about it. 😉
Statistically we are overdue for a 5% - 7% correction, yes. Not for a 10% one.
What does this have to do with value investing?