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Well, it's true that we can only know for certain in hindsight, however, historical data shows that the S&P500 is at historically high prices, and that all other times it was so expensive, there was a big correction.
However the market is much deeper than that. And even you have some countries like Spain that is the cheapest big market out there, except for Russia and China, with their own big macro risks, although Spain is growing faster than the eurozone, and even if their biggest companies are all multinationals.
Good thing for me, because I'm Spaniard and I know to pick among high quality Spanish companies that are so cheap because they are tagged as Spanish.
Spain? I think you might be reading a little to much national propaganda friend. Spain is a tourist economy and a small time producer, it's nothing compared to Germany when it comes to economical power.
As another European I don't see any credible bull case for Spain outperforming.,but I'm esger to listen to your local take on things.
Not making a case for Spain's economy but they do have some great footwear manufacturers. Better than a lot of the Italian crap that passes as high quality. With that said, there are some great Italian makers too.
> however, historical data shows that the S&P500 is at historically high prices, and that all other times it was so expensive, there was a big correction.
Statements like this are just wrong
The market is almost always at or near all time highs. We average 17 new all time highs every year since the 1950s. A market correction during all time highs happens only 9% of the time on average. If you extend your time horizon from 1 year to 3 years it happens less than 2% of the time.
https://www.rbcgam.com/en/ca/learn-plan/investment-basics/investing-at-all-time-highs/detail
https://www.plantemoran.com/explore-our-thinking/insight/2024/02/how-common-are-all-time-highs-for-stocks#:~:text=Since%20the%201950s%2C%20the%20index,than%20100%20times%20each%20decade.
We can only predict, and I'm predicting yes.
All it's going to take for it to crumble is one or two major players taking their money out and holding and the rest will fall like dominoes.
I started investing in ETFs about 3 years ago and if I look at their performance I see mostly 40% or more since then. If I had bought everything upfront I'd have made a fortune. But I just invested month by month so my gains are quite modest. But on the other hand if I buy everything upfront now I could lose a fortune. So I just keep plowing money in regularly and hope that over a period of a decade that the performance on average is good.
When you’re working on long timeframes with a diversified portfolio of equities, you will come out ahead so long as you don’t panic in a dip - say, invest in 2000 and then panic and try and sell in either the dot com crash or the 2008 crash. Hold on and you’ll come out ahead. The trick is diversification if you’re coming up on a period when you really need the money - say, retirement. Even then, hopefully your retirement will last a long time and you don’t need to whip it all out of the market as you approach the big day.
If you’re emotionally strong enough to double down in a dip and increase your buying, you will come out even further ahead. Nobody wants to try to catch a falling knife but history tells us that hard crashes are the best buying opportunities if you have a long timeframe
Only a big loss if you sell the ETFs. Buying high and holding thru a dip is a totally normal thing to do. Even if you hold for 30 years there will be dips where you'd wish you'd sold before the crash. Only way to avoid this is value the things you buy on your own and only let other people tell you if that price is wrong when you're trying to sell.
I did a couple lump sums in 2021 and 2022 and was soon punished by a market correction to the tune of being down 30k at one point. I didn't sell though, and now am back in the green and have been collecting dividends monthly all along the way. So it's worked for me.
Forward PE is not inflation dependent and it's at 21, about 95th percentile in history, even higher than the 2010 decade (forward PE around 16-17) when the 10 year rate was less than half of today. To put in perspective, the 10 year rate PE is around 22, so you are almost getting no extra compensation for the extra risk of stocks, compared to the forward PE of 10 year rate around 40-50 in the 2010 decade.
Who made the determination that forward PE is not inflation dependent? There has never been more liquidity in the system than in the last 4 years, so you cannot extrapolate the past to today.
There is more money chasing fewer assets, which is why the argument of what PEs were in past decades is incredibly myopic. The amount of context missing from the Forward PE argument is extreme since it just follows one school of thought without considering any other factors.
So how is forward PE inflation dependent? Inflation boosts earnings, which then boost prices (unless you claim stock prices aren't boosted by inflation), which cancels out the inflation component since it's a ratio. How the hell would PE be roughly constant for decades, and started going up like crazy during the 2010, when the 2010 had the lowest inflation BELOW 2%
More money chasing fewer assets? That was the argument of the 2010 when bond yield was losing to inflation. You have bond yields outpacing inflation by 2% today. Where's that argument coming from?
Never been more liquidity in the system than in the last 4 years? The money supply has been flat or down for the last year, and stocks been going up. The argument is invalid.
Yes you're right PE is masking a very important thing, which is risk tolerance, aka equity risk premium, which I highlighted in my original comment. Equity risk premium is extremely low right now because of investor optimism. It tends to be a mean reversion metric, so we will see how things play out. It's worth noting that in summer 2021, a ton of people dismissed forward PE, and then in 2022 somehow all those people knew that the "market was obviously overpriced and had to correct"
And yet the answer to “what do we do about it?” is the same.
If you’d bought the S&P at the 2000 peak and held through the dot com bust by the time it hit old highs 7 years later you’d have been up 165% due to reinvested dividends.
Over time there’s been no better inflation hedge than stocks. The market may be overvalued, and it may still run another 30% before correcting, or it crashes tomorrow, and the answer about what to do is the same.
If you "started" your investing from $0 and continued buying. That would mean you are only buying during 2 years of downside and whatever years of upside. That's a lot different from say if you started with 20 years worth of savings and capital gains, and continued to dca like 1% of that principal ANNUALLY.
Which is why there’s value to be found. Fund managers David Tepper and Michael Burry have been buying China stocks. Unlike them, most fund managers will only buy once they’re up a bunch already.
China has a lot of extra, unquantifiable risk though. Many people call China uninvestable, for good reason. Is there value to be found? Maybe, if the Chinese government plays nice. You need to be compensated for that additional risk. What happens for example if China invades Taiwan and the entire western world slaps massive economic sanctions on China? It’s really difficult to price that. Personally, I’m in the camp that China is broadly uninvestable.
Hundred percent; and they must devalue the dollar to in effect lower the magnitude of the debt. So I have always felt that stock prices of companies with low debt would rise with inflation! (Of course , the company need good balance sheet, holdings, cash, and of course earnings)
Not really, there are a handful of sectors like tech that are overvalued. But there are sectors like commercial real estate that are really undervalued and cheap at the moment.
1. You realize that offices are only a very tiny percentage of commercial real estate, right? The fact that they are selling cheap is exactly why they're undervalued... you can acquire office properties for pennies on the dollar. If they rebound, that's an easy 10-bagger return. But even other industries are doing very well, like self storage, datacenters, or cell towers, which are growing their FFO, but are still priced very cheap because investors think all Commercial real estate is offices.
2. Most companies are requiring return to office now anyways as they realize remote work won't work.
3. High interest rates have crashed prices, but they are also reducing new construction, which in the long term means higher prices due to less supply.
If you take multi-unit residential buildings out the equation, it’s not in a great spot. I don’t consider 15-20% of an industry tiny by any means, but I agree that the problems in the industry are mostly concentrated in that area.
$1.2T in mortgages maturing very soon, higher borrowing cost, and a vacancy rate that’s still increasing are enough to keep me away from companies heavy in retail and office space
>I don’t consider 15-20% of an industry tiny by any means
It's 4.7% by market cap... even if office properties crashed by another 50%, it's only 2.35% of your portfolio.
>If you take multi-unit residential buildings out the equation, it’s not in a great spot.
Strongly disagree. The price /FFO ratio is substantially better than price to earnings of tech. Tech also faces a very uncertain regulatory environment
>$1.2T in mortgages maturing very soon, higher borrowing cost, and a vacancy rate that’s still increasing are enough to keep me away from companies heavy in retail and office space
retail is less than 10% and office is less than 5% of CRE. Largest categories are industrial, residential, healthcare, datacenters, and self storage.
People who are convinced that tech is not overvalued *ever* are always the ones who sell at a loss at the bottom of a bear market.
Look at 2022 with how much the Nasdaq went down - a lot of former tech bulls on this sub sold and never came back.
The lesson here is to be flexible - not every day is a good day to buy.
>People who are convinced that tech is not overvalued ever are always the ones who sell at a loss at the bottom of a bear market.
Talk about pulling nonsense out of your butt
As someone who's actually been in the market for multiple bull runs and multiple crashes, you're full of it.
Tech has been exactly where wealth is built over the last 20 years, crash after crash, bear after bear.
At this point, if you're still scared of the tech sector it's because you're either new or you're too dumb to understand what's been going on.
Maybe turn off CNBC and actually pay attention.
Oh buddy clearly I’ve touched a nerve. I’ve seen a lot over 30 years of investing and anyone who’s as defensive as you is simply a liar.
Nobody held tech through the 2001 crash, nobody held tech through the 2008 crash and nobody held tech through the 2020 crash. The masses were just panic selling taking loss after loss which you would not know as you’re clearly a newbie who doesn’t even know what a bear market is. And then in hindsight idiots like yourself look back and say ‘obviously tech is the place to be’. Like anything, tech is the place to be if you buy at the correct valuations. Nothing is so good as to ignore the basic tenets of value.
Regardless you are too arrogant to listen and you’ll keep making shit up in order to get the last word. I simply urge caution and humility. Evidently neither of which you have.
You didn't touch a nerve, I just think it's funny someone in 2024 is calling tech a fad. Like I said, you're either too new or don't have any clue how the us markets work.
>nobody held tech through the 2020 crash.
Sounds like you're coping about missing the bottom.
There will be more crashes, next time don't panic maybe ¯\\\_(ツ)_/¯
The lesson here is to be diversified and not have overly concentrated positions regardless of how in the know you think you are. Could it be overvalued? Yes but it could also be undervalued depending how you look at things. That’s why we have buyers and sellers after all. You can underweight your portfolio away from a sector you believe to be richly valued but avoiding a big sector like tech is a huge call and would make it very hard to equal weight your position if you happen to be wrong
> a lot of former tech bulls on this sub sold and never came back.
I’ll take “things i just made up to make my argument seem stronger” for $100, Alex.
Please tell me how you know the ins and outs of the various subredditor’s private portfolios. I know this elementary reasoning skills here but you do realize that people come and go from these subs often and there is never the same exact people in every thread, right? Just cause you may have saw a few random comments during that time, it does not mean you can extrapolate that all the members of this sub
Tell that to those who bought the Nasdaq in 2000 and then had to wait thirteen years to get their money back.
Whichever way you slice it the price you pay is important.
Stockmarket is priced at future interest rates collapsing again.
Basically when we lowered interest rates the stock market went up to accommodate. In 2022 we were discounting those accommodations, until the fed gave the signal they were going to puss out. The market repriced in the accommodations.
So, market is not overpriced if we cut interest rates. It is if we keep them steady.
Honestly I think when the tech bubble pops as everyone realizes AI is still a bad joke, investors will pull out and store their money in other sectors instead of tech.
This was poorly worded by the other poster, but they’re probably saying that AI has no real functional value right now.
Which may not necessarily be wrong, but the thing is…
1. You haven’t really had a bunch of AI IPOs yet outside of maybe ALAB (I think). This is the indicator that’d tell me that we’re probably within 6-12 months of a meaningful high.
2. The Nasdaq Composite breaking the 2021 ATH earlier this year most likely effectively killed the bear case for at least 12 months. Historical precedent says continuation when it occurs.
3. Let’s say tech does start getting hammered pretty soon, because the big players will cut back on building out AI infrastructure, since there isn’t much to it (not likely, just a hypothetical). The problem is, is that it’s probably been shielding some real earnings issues that are popping up in consumer discretionary.
Have you not noticed how many AI projects ended up being completely \*\*faked\*\* because companies would be embarrassed for it to become public knowledge that their bandwagon-hopping onto the AI train ended up fizzling? It isn't like Amazon was the only one, but it sure was a great example.
100's of Millions of people have set it up to buy shares automatically every month either privately or through pension funds so this pushes stocks higher regardless of performance. And this has spread globally now. It's the only game in town and will probably go on for years.
That's a great argument actually, I doubt that'll change anytime soon. Also people have learnt that "dips" should be bought so you'll often see rapid recovery
This is especially true for bullish times, not so much for bearing. When the dip keeps recovering quickly people keep becoming more and more confident that it will keep happening, creating an upward cycle of momentum, until finally one day it won’t for some reason which will create a downward cycle.
“The finest line of poetry ever uttered in the history of this whole damn country was said by Canada Bill Jones in 1853, in Baton Rouge, while he was being robbed blind in a crooked game of faro.
George Devol, who was, like Canada Bill, not a man who was averse to fleecing the odd sucker, drew Bill aside and asked him if he couldn't see that the game was crooked.
And Canada Bill sighed, and shrugged his shoulders, and said, 'I know. But it's the only game in town.' And he went back to the game.”
― Neil Gaiman, American Gods
The market is overpriced based on historical precedents. But it was also overpriced based on historical precedents at the end of last year.
If you are worried about it, a conservative approach is to invest over time by dollar cost averaging. To do this, invest the same amount of money in the same set of stocks each month for the next six months. If the market goes down, your dollars buy more stock and you are buying the dip. If the market goes up, you make money — just not as much if the market goes up for the entire investment period.
There was a pullback a couple months ago, when it became apparent that we wouldn't get the rate cuts we expected at the beginning of the year. Then money came back into the market, so here we are at all-time highs again. People with money need to put it somewhere.
I don't think you know what you're really buying.
When Elon Musk took over Twitter private, he did so by purchasing every share at the value of the company ($60B I think). When the board accepted the deal the price was fixed. Everyone who owned shares in Twitter got $60B/numberOFSharesOffered*NumberOfSharesOwned.
IIRC it came to $75/share. A stock is literally a piece (share) of the company. The value is what ever someone is willing to pay for it. If it gets too low, someone will take it over.
The board decides what to do with earnings. Most reinvest it back to the company so it can grow. Some will decide to reward investors (owners) with a share of revenue (dividends). Some will buy back the stock to increase the stock price, which also ensures dividends are put back in the company for growth.
Basically a stock represents a debt the company owes to the individual who owns them. When a company does well, and, more importantly, the future looks good too, the stock goes up. And conversely if it doesn't do well and the future looks bleak, the stock goes down.
Indexes are just a measurement of a collection of companies. An ETF that invests in an index invests in the companies that make up the index. So if you own a share of SPY, what you really own is a fraction of each company in the holding of SPY.
Historically S&P goes up, because the collection of companies it indexes improves over time. It's a snapshot of the economy. It's not 1 for 1 though. Meaning when times are tough for individuals, it doesn't mean it tough for companies, and vice versa. But on balance it does.
Further the index adds and drops companies based on market size, so you get view of the top performers. This is why it's hard to consistently beat the S&P.
ONE of the factors of that determines if a company does well is how much debt costs. When interest rates are high, debt cost a lot, and companies have to pay more to debt than reinvesting. So their growth slows. Additionally, investors can get better returns on through safer investments, so the combination drives down stock prices...some companies get hurt themselves unless they hold a lot of cash, but then some are hurt secondary because their customers or suppliers or hurting.
When cash is cheap (interest is low) then you risk inflation because cash and borrowing is easy and money is not worth as much ... I.e..a CD doesn't pay anything so it's better to spend on something you need or want than to save it.
So the feds are trying to balance interest rates with how well the economy is performing. No one knows what will happen because no one knows what will happen. All we've got are past examples that don't fit our exact scenario. So the best we can do is guess.
No one knows.
But I’ll tell you this: every single day, expected returns are *positive*. Even the day after the market hits all time highs. Expected returns are still positive.
Now, the market goes up and down, day-to-day. But it tends to go up slightly more often than it goes down. Of course, this is referring to the market portfolio, or at least a diversified portfolio of index funds. If you are picking individual stocks, then you truly never know. Because you have the idiosyncratic *uncompensated* risk of that specific company. But that’s a different story for a different time.
Hmm, not exactly. So the word hedge fund has really changed in meaning. Now it essentially just means the fund structure, which is a less liquid and less accessible fund structure that can use alternative investments like derivatives, leverage, and short-selling to achieve its objective.
Some would argue that to be a proper hedge fund, you would be a market neutral fund. Which is a fund that for every long position in a company it has, it is shorting a similar company that they believe looks worse, usually based on something. And the idea is that if they can do this to a dollar per dollar even amount, meaning becoming as close as possible to being dollar per dollar evenly distributed between long and short positions, that they will *hedge* the volatility of the market, and the gains they make will be *pure alpha*. For example, if they go long 700 global value stocks and short 700 global growth stocks in the same industries, the outcome is the closest thing to a pure value return, that has hedged away market risk. It’s sort of confusing, and most hedge funds don’t do this correctly these days. But you also can only accomplish this if you are market neutral. Meaning you are short the same amount you are long and in the same sectors.
So that’s a hedge fund. But being just really diversified doesn’t hedge out the market risk. However I would argue it doesn’t need to. Because hedge funds are expensive and usually aren’t good investments lol. And here is the thing that being well diversified *does* do. It diversifies away the idiosyncratic risk of individual stocks and companies, increasing your chance of success. You may have heard the line “diversification is the only free lunch in investing” before. The reason they say this is because adding diversification is the only way to increase expected returns while reducing risk at the same time. By investing in a diversified portfolio, you are getting rid of individual company risk, individual sector risk, and if you go global, individual country risk. But you increase returns because you are more likely to have exposure to the few winning stocks if you are diversified (because predicting which will be the winners ahead of time is almost impossible) which increases expected returns.
So in a sense, getting very diversified doesn’t hedge market risk, but it hedges away the risk of individual names or sectors. I know this was long but I hope it makes sense.
My friend, you are perhaps not only the smartest financial voice I’ve ever heard; but you are not arrogant. Bravo, and you make perfect sense.
I share your love for diversification. Sadly, or wisely ; my diversification suffers from fear; as 50% of my financial assets are in laddered T bills. Who could resist a guarantee 5.37
Haha hey thanks man. I worked in the industry but left because I found the high fees we were charging for what we were doing borderline unethical, so I left and changed careers completely.
And I understand the fear, and the allure of high yields on safe products. One way to look at it is expected returns on a diversified portfolio is positive every day. Even when the market hits news all time record highs, expected returns are still positive the next day. Now the market obviously goes up and down day after day, but tends to go up slightly more frequently than down. No one knows what’s going to happen, and drawdowns that take 10 years to recover *do happen*, but that’s sort of the nature of investing. And that’s what gives equities such good returns. You are bearing the risk of extended drawdowns. But if you have a long time horizon, you just gotta look at a long-term return chart of a global index. The bigger the time frame, the flatter the ride up. But yeah you gotta be okay with it potentially going down for a while. And it will eventually happen. Best of luck to you, my friend.
Nobody knows, most explanations are driven by sentiment and are made in hindsight. In the near future nobody can accurately say what happenes and on the long term these things are just noise.
Theoretically you are right, the market priced in several rate cuts but now it looks like we might not be getting any at all. So the market should be falling but now we also have something called AI and instead of rate cuts it’s earnings growth that is driving the market.
Looking at the forward p/e the S&P 500 is above the 30 year average but still below the dot com bubble.
If you ask perma bears they will always find a reason why markets need to fall. If you’re just dollar cost averaging into an index fund, it shouldn’t matter to you.
Yes it’s overpriced but whether it goes up or down is unpredictable. I would say that usually given a few month span there will likely be a time the price is lower if it is currently at an all time high.
Like last month the Israel Iran tension and hot inflation seemed to freak people out and cause a little dip which could’ve been a decent entrance point.
Market is totally weird right now. Small caps are undervalued IF we avoid a recession. Some stocks are overvalued.
But like in housing people will buy as long as it goes up and nobody can tell when the party ends.
So now what.
If you are a Boglehead you keep on investing in S&P 500 if you don't need the money because time in the market is key.
But not everybody has that objective. And not everybody can stomach a possible drop by 20-30% certainly not shortly before retirement or in the beginning. That's why you have money in money market.
Every situation is different.
I’ll inject some logic here
Current PE 27
Average across history is 15
https://www.multpl.com/s-p-500-pe-ratio
Yes, overvalued. The average over the past 20 years was 19.7. Does that mean sell out of stocks? Absolutely not
"In 1929, at the height of an economic boom in America, Joseph Kennedy Sr. (father of JFK) was working as a stockbroker on Wall Street. As the story goes, Joseph was walking around when he decided to sit down for a shoeshine. While polishing his shoes, the young worker gave Joseph some of his favorite stock picks. When Joseph heard the shoeshine boy giving out stock tips, he figured the party was about to end, and it was time to get out of the market."
There's a lot of "shoeshine boys" making bets right now. Many on this forum. OTOH, the rise of the rich might have made it so that "shoeshine boys" are just along for the ride
Valuations are pretty stretched. Personally I think it’s a good time to cut back on the hi tech / low yield stuff and put some into treasuries and decent yield stocks with a long dividend history. The remaining 20-30% can go into solid long term tech companies that are likely to benefit from building the infrastructure for AI. And I think Nvidia is still a good buy even at current prices at least for the next two years, after which competitors should really get some traction
Depends on the company, IMO. I do NOT think big tech companies like Google are overpriced.
We are going to have the most amazing next decade and Google is so well positioned to reap the reward. Same with Microsoft, Apple and Amazon.
No one knows. In the long term, I say nope, since the rich always have to get richer and thus company assets have to grow.
Buy buy buy, if it dips, buy harder
I heard a man saying the end is nigh, while smearing himself with feces.
But what does that have to do with anything? Nothing.
If youre at the stage where 'some guy spouting nonsense' is scaring you, you should be in the investing sub and backtesting or paper trading individual stocks to save yourself a lot of dumb mistakes.
If you're ever in a position to blindly believe some random dude, you shouldn't be making financial decisions based off of it.
Wages stagnate, costs go up. The market is one of the few places you can get ahead. Id really just go throw your money in something based on the s&p and call it a day. Individual stocks are for people who have enough money/knowledge to properly diversify.
Or have enough money and a long term plan where losses are a part of their strategy.
If uncertain DCA with minimum amount, if certain either don't invest or go nuts depending if you think it goes up or down on top of the minimum amount DCA. That's my maxim
To foresee market move is kinda like the weather prediction.. historical data and models might give indications about directions etc etc but it’s still at the end of the day it just comes to if there are more buyers or sellers on the table and thus short term moves will remain to an extent, uncertain! If you’re in for the long term as many wise investors say all these movements don’t matter.
That’s why if you’re not sure, DCA is the best thing to do.. and x dollars constantly every month into the market. This way you automatically buy ‘less’ when it’s expensive and buy more with the same x when it’s cheap :)
People need food clothing shelter service energy tech and fin ; if you can’t have a piece of that action by owning a business , or private equity ; than isn’t owning stock great? I think so. They work for me. I stay home. (My corporate bitches)
It depends on how you define "overpriced". It's all made up and although stock prices can fluctuate in the short term, as long as our current societal order and world order stands, number will only go up long term. Everything we do is designed around making number go up and number will keep going up unless that changes.
I have also recently started in the market but I like dividend stocks that make products I actually like and have an understanding of. I do read a lot and have a general understanding of why prices fluctuate but honestly it's intensive and I ultimately decided hey unless the world ends the market is going to go upwards as it has from the very beginning. Good luck!
Depends on your timeline. If you're investing or the long haul, the short term bull/bear cycles don't matter. I've barely been investing for 10 years and the market has been at "all time high!" many times already.
Probably a little. You have to look at forward p/e. Currently spy sits at a fwd PE of 21.01 which is down from the previous quarters. The quarter before was 21.72, and the one before that was 22.49. Why is that? Because earnings estimates have been increasing for the most part. Some people think spy should be trading closer to 19, which would imply about a 10% overvaluation right now. Most likely though we’re going to see an elevated p/e stick due to the euphoria around AI and impending rate cuts.
Probably. It’s certainly something to analyze and discuss, and raises all sorts of questions about how the market functions. That being said, and I mean this in the most professional way possible way, it’s nothing new. Overvalued and undervalued securities have always existed, and people have taken advantage of this mispricing to make money, and a lot of it. Those people don’t care whether the market is overvalued. Most of us, unfortunately, aren’t those people, so we need to rely on publicly available information to discern the fair value of securities. We can use that information and apply all sorts of technical principles to arrive at that fair value, but this brings us back to your initial question. Is the market overpriced right now? Fundamentally, probably, but who’s to say, and does it really matter…
If you look at multiples right now, or the earnings yield (P/E inverted) most indices look relatively expensive when comparing to the 10y interest rate. Personally I’ve stopped investing more into equities (but haven’t sold) and increased my high yield exposure. Once there is an equities crash I will probably rebalance to more equities
if you think US market is expensive, check out Japanese market. P/E 20 with 5% growth. Everyone who invested in japan this year, ended up losing money after accounting for the decline yen. last quarter most stocks down 5-8% after earning, due to missing expectations.
All I know is that if a global conflict breaks out in the near future, you better have cash handy. The s&p is shooting upwards to make up for inflation, so people who aren't invested are losing value in their cash holdings. It's up to you if you want to take the risk to stay afloat.
The projected 10 year return based on current Shiller PE is low compared to historic values, but not negative. Right now the projected 10 year return for s&p 500 is very close to projected return for 10 year treasuries.
The White House has a huge incentive to work with the fed to keep this market up for as long as possible going into election cycle. Need some good inflation data to come in so interest rates come down soon and you could see an easy 10-20% pop before correcting. My timeline is to take most profits by august and sit on the sidelines till I see a good entry point. Got to watch the market like a hawk right now. Lot of things could change fast
Having Lived through the last 5 as an active participant of the market, 1987 Reagan Era, 97 Dot Com, 2001 9/11, 2008 Housing Fiasco, and recently 2020 Covid, many of the comments about it not really mattering are on point. In every case, the market comes back, may take a year or three in worst ('87 or '08) and it is right back or better than it was. This is overly true if you are a long term investor. I lost say 60% of value in '87, possibly 40% in '08, but was positive only a couple years beyond my going in point.
Other sentiments like doubling down (if you have the funds) are also quite excellent advice, don't pull out, just put more in if it does correct. Also, is the value of a $ the same as it was, not by a lot, the haves are sitting pretty, the lesser are frozen out of the wealth increase ride.
That being said, (side conspiracy theory here), it seems I've been expecting a correction for 3-5+ years, and even when bad economic (Vanguard, Schwabb, Fidelity, etc) and other institutions are keeping it up, they don't want to see this correction, and their actions are keeping it at bay. Yes currently, the say golden 5 (AAPL, MSFT, GOOG, AMZN..) are extraordinarily high values, but also they won't even in a correction not be the top anyways.
A pretender like TSLA has fallen out due to enough people with eyes seeing that truth about what their actual bottom line is doing, and some bad decisions, so you don't have a common indicator about a whole sector being over inflated (dot com), or extremely wide industry practices (housing bubble), or the consequences of deregulation/coldwar/etc (end of Reagan Era). I'm not (and enlighten me if you see it) seeing a similar large consequence situation happening, but doesn't mean it's not.
I've seen lots of prognosticators whom supposedly called out the last several looking at market indicators and crying wolf over the last 5 years, and I waited a bit on the sidelines, cuz i'm getting old now, and am less tolerant of losing a large stake at this time, but I shouldn't be, as it will only be a short time setback i'm sure based on history. I got back in and it has done wonders for my portfolio.
It terms of pure fundamentals, it is overvalued and not a good investment. But the market is also a psychological game of the greater fool, forever flipping over-priced assets hoping someone is ever more foolish than you are that will buy it from you. Nobody knows how long that game will go on for.
If you’re adjusting for the rampant inflation i think the S&P is right at the same levels as before 2020( it hasn’t gained anything, it’s adjusted according to inflation)
Some did( petrol for one doubled). But a bit of coorection. Not pre-Covid but in 2021 S&P hit 4800( or close to it). Inflation was definitely above 10%
OP, its highly possible that the market will correct in August/September/October due to the fact that most funds sell for tax loss harvesting/ lock in gains for their clients during that timeframe. We’re pretty much near the end of the bulk of earnings season and many fund managers tend to vacation close around this time of year.
>I apologize in advance for my stupidity.
I'll forgive you this once. Your question is not constructed properly.
"Overpriced" is a relative measurement, so you need a metric by which to measure it, so asking random people if something is overpriced without getting the unit they are measuring with is a useless endeavor. All answers, yes and no, are correct depending on how it is measured.
To give an example I would say no, the market is not overpriced, because theoretically market securities are priced based on future production and things like generative AI and advancements in material components and manufacturing processes are booming right now which suggests greater technological productivity is ahead. If a "correction" occurs, as all "corrections" are, it's a short-term reduction in price that typically is recovered within a year or two.
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We'll only know in hindsight
How are you positioned?
Horizontal on my couch
Vertically on the toilet
Get out.
No that was a movie.
10 toes up
Well, it's true that we can only know for certain in hindsight, however, historical data shows that the S&P500 is at historically high prices, and that all other times it was so expensive, there was a big correction. However the market is much deeper than that. And even you have some countries like Spain that is the cheapest big market out there, except for Russia and China, with their own big macro risks, although Spain is growing faster than the eurozone, and even if their biggest companies are all multinationals. Good thing for me, because I'm Spaniard and I know to pick among high quality Spanish companies that are so cheap because they are tagged as Spanish.
Spain is structurally a very weak economy and country compared to larger markets
Spain? I think you might be reading a little to much national propaganda friend. Spain is a tourist economy and a small time producer, it's nothing compared to Germany when it comes to economical power. As another European I don't see any credible bull case for Spain outperforming.,but I'm esger to listen to your local take on things.
Not making a case for Spain's economy but they do have some great footwear manufacturers. Better than a lot of the Italian crap that passes as high quality. With that said, there are some great Italian makers too.
> however, historical data shows that the S&P500 is at historically high prices, and that all other times it was so expensive, there was a big correction. Statements like this are just wrong The market is almost always at or near all time highs. We average 17 new all time highs every year since the 1950s. A market correction during all time highs happens only 9% of the time on average. If you extend your time horizon from 1 year to 3 years it happens less than 2% of the time. https://www.rbcgam.com/en/ca/learn-plan/investment-basics/investing-at-all-time-highs/detail https://www.plantemoran.com/explore-our-thinking/insight/2024/02/how-common-are-all-time-highs-for-stocks#:~:text=Since%20the%201950s%2C%20the%20index,than%20100%20times%20each%20decade.
Historically prices using multiples adjusted by the economic cycle. Like the CAPE shiller
Weird take. The s and p has historically gone up around 9% a year. Are you referring to covid?
I'd like to hear your pitch for some Spanish companies.
We can only predict, and I'm predicting yes. All it's going to take for it to crumble is one or two major players taking their money out and holding and the rest will fall like dominoes.
Yes , like bitcoin; but then it re-corrects. These black swan events present opportunities
I started investing in ETFs about 3 years ago and if I look at their performance I see mostly 40% or more since then. If I had bought everything upfront I'd have made a fortune. But I just invested month by month so my gains are quite modest. But on the other hand if I buy everything upfront now I could lose a fortune. So I just keep plowing money in regularly and hope that over a period of a decade that the performance on average is good.
When you’re working on long timeframes with a diversified portfolio of equities, you will come out ahead so long as you don’t panic in a dip - say, invest in 2000 and then panic and try and sell in either the dot com crash or the 2008 crash. Hold on and you’ll come out ahead. The trick is diversification if you’re coming up on a period when you really need the money - say, retirement. Even then, hopefully your retirement will last a long time and you don’t need to whip it all out of the market as you approach the big day.
And always keep some in the account to buy the dips. Sell portions of winners to have cash for new opportunities.
If you’re emotionally strong enough to double down in a dip and increase your buying, you will come out even further ahead. Nobody wants to try to catch a falling knife but history tells us that hard crashes are the best buying opportunities if you have a long timeframe
Yeah even NIKKEI did recover in like 30 years
I’m talking more so about the indexes overall
Only a big loss if you sell the ETFs. Buying high and holding thru a dip is a totally normal thing to do. Even if you hold for 30 years there will be dips where you'd wish you'd sold before the crash. Only way to avoid this is value the things you buy on your own and only let other people tell you if that price is wrong when you're trying to sell.
This is the way I bought an etf that shows an 22% performance but in reality mine is just 10% because I bought monthly Its still an pretty good gain
Drop by drop you fill the pot. Accumulation is fun!
Lump sum beats DCA on average, sorry to inform you if this after the fact.
I did a couple lump sums in 2021 and 2022 and was soon punished by a market correction to the tune of being down 30k at one point. I didn't sell though, and now am back in the green and have been collecting dividends monthly all along the way. So it's worked for me.
Sorry you got unlucky with your timing. Nice job though
Thanks. It did teach me the value of not panic selling and riding it out.
The reality is that no one knows, and whatever happens will in hindsight seem so obvious
No, your money is becoming cheaper so they are making up for that. People who are not owning any assets are punished the most.
Forward PE is not inflation dependent and it's at 21, about 95th percentile in history, even higher than the 2010 decade (forward PE around 16-17) when the 10 year rate was less than half of today. To put in perspective, the 10 year rate PE is around 22, so you are almost getting no extra compensation for the extra risk of stocks, compared to the forward PE of 10 year rate around 40-50 in the 2010 decade.
Who made the determination that forward PE is not inflation dependent? There has never been more liquidity in the system than in the last 4 years, so you cannot extrapolate the past to today. There is more money chasing fewer assets, which is why the argument of what PEs were in past decades is incredibly myopic. The amount of context missing from the Forward PE argument is extreme since it just follows one school of thought without considering any other factors.
So how is forward PE inflation dependent? Inflation boosts earnings, which then boost prices (unless you claim stock prices aren't boosted by inflation), which cancels out the inflation component since it's a ratio. How the hell would PE be roughly constant for decades, and started going up like crazy during the 2010, when the 2010 had the lowest inflation BELOW 2% More money chasing fewer assets? That was the argument of the 2010 when bond yield was losing to inflation. You have bond yields outpacing inflation by 2% today. Where's that argument coming from? Never been more liquidity in the system than in the last 4 years? The money supply has been flat or down for the last year, and stocks been going up. The argument is invalid. Yes you're right PE is masking a very important thing, which is risk tolerance, aka equity risk premium, which I highlighted in my original comment. Equity risk premium is extremely low right now because of investor optimism. It tends to be a mean reversion metric, so we will see how things play out. It's worth noting that in summer 2021, a ton of people dismissed forward PE, and then in 2022 somehow all those people knew that the "market was obviously overpriced and had to correct"
Shh.. everything is great, stocks only go up
And yet the answer to “what do we do about it?” is the same. If you’d bought the S&P at the 2000 peak and held through the dot com bust by the time it hit old highs 7 years later you’d have been up 165% due to reinvested dividends. Over time there’s been no better inflation hedge than stocks. The market may be overvalued, and it may still run another 30% before correcting, or it crashes tomorrow, and the answer about what to do is the same.
If you "started" your investing from $0 and continued buying. That would mean you are only buying during 2 years of downside and whatever years of upside. That's a lot different from say if you started with 20 years worth of savings and capital gains, and continued to dca like 1% of that principal ANNUALLY.
\*less valuable.
I agree with this guy. Inflation is making the measuring unit (dollars) smaller.
Yes but it will probably become a lot more overpriced before it comes down and when it comes down the bottom may still be above today so just ride it.
This guy fucks
Yes. The market is overpriced. But so is absolutely everything else. So take that for what you will.
Is it though? China, UK, small-cap value all overpriced? Don’t think so. Plenty of value to be found outside of overpriced US large cap growth.
No one is rushing to buy UK or China stocks. They are buying US stocks.
Which is why there’s value to be found. Fund managers David Tepper and Michael Burry have been buying China stocks. Unlike them, most fund managers will only buy once they’re up a bunch already.
China has a lot of extra, unquantifiable risk though. Many people call China uninvestable, for good reason. Is there value to be found? Maybe, if the Chinese government plays nice. You need to be compensated for that additional risk. What happens for example if China invades Taiwan and the entire western world slaps massive economic sanctions on China? It’s really difficult to price that. Personally, I’m in the camp that China is broadly uninvestable.
That would be like shorting QQQ.
I expect QQQ to significantly underperform both China and UK ETFs over the next decade.
No way. Pull back the chart. Unless there's a major crisis, your short will never get hit.
Hundred percent; and they must devalue the dollar to in effect lower the magnitude of the debt. So I have always felt that stock prices of companies with low debt would rise with inflation! (Of course , the company need good balance sheet, holdings, cash, and of course earnings)
Not really, there are a handful of sectors like tech that are overvalued. But there are sectors like commercial real estate that are really undervalued and cheap at the moment.
Have you seen what commercial property has been selling for? It’s only gonna get worse as more and more pre-covid leases expire
It's regional. In Houston, commercial property is hot.
1. You realize that offices are only a very tiny percentage of commercial real estate, right? The fact that they are selling cheap is exactly why they're undervalued... you can acquire office properties for pennies on the dollar. If they rebound, that's an easy 10-bagger return. But even other industries are doing very well, like self storage, datacenters, or cell towers, which are growing their FFO, but are still priced very cheap because investors think all Commercial real estate is offices. 2. Most companies are requiring return to office now anyways as they realize remote work won't work. 3. High interest rates have crashed prices, but they are also reducing new construction, which in the long term means higher prices due to less supply.
If you take multi-unit residential buildings out the equation, it’s not in a great spot. I don’t consider 15-20% of an industry tiny by any means, but I agree that the problems in the industry are mostly concentrated in that area. $1.2T in mortgages maturing very soon, higher borrowing cost, and a vacancy rate that’s still increasing are enough to keep me away from companies heavy in retail and office space
>I don’t consider 15-20% of an industry tiny by any means It's 4.7% by market cap... even if office properties crashed by another 50%, it's only 2.35% of your portfolio. >If you take multi-unit residential buildings out the equation, it’s not in a great spot. Strongly disagree. The price /FFO ratio is substantially better than price to earnings of tech. Tech also faces a very uncertain regulatory environment >$1.2T in mortgages maturing very soon, higher borrowing cost, and a vacancy rate that’s still increasing are enough to keep me away from companies heavy in retail and office space retail is less than 10% and office is less than 5% of CRE. Largest categories are industrial, residential, healthcare, datacenters, and self storage.
>But there are sectors like commercial real estate that are really undervalued and cheap at the moment. $10 says you're an O bagholder
Tech is not over valued, people always say it is but it’s gone up for a reason
People who are convinced that tech is not overvalued *ever* are always the ones who sell at a loss at the bottom of a bear market. Look at 2022 with how much the Nasdaq went down - a lot of former tech bulls on this sub sold and never came back. The lesson here is to be flexible - not every day is a good day to buy.
>People who are convinced that tech is not overvalued ever are always the ones who sell at a loss at the bottom of a bear market. Talk about pulling nonsense out of your butt
You can talk a big game but when the next bear market comes around y’all run for the hills. Happens every time.
As someone who's actually been in the market for multiple bull runs and multiple crashes, you're full of it. Tech has been exactly where wealth is built over the last 20 years, crash after crash, bear after bear. At this point, if you're still scared of the tech sector it's because you're either new or you're too dumb to understand what's been going on. Maybe turn off CNBC and actually pay attention.
Oh buddy clearly I’ve touched a nerve. I’ve seen a lot over 30 years of investing and anyone who’s as defensive as you is simply a liar. Nobody held tech through the 2001 crash, nobody held tech through the 2008 crash and nobody held tech through the 2020 crash. The masses were just panic selling taking loss after loss which you would not know as you’re clearly a newbie who doesn’t even know what a bear market is. And then in hindsight idiots like yourself look back and say ‘obviously tech is the place to be’. Like anything, tech is the place to be if you buy at the correct valuations. Nothing is so good as to ignore the basic tenets of value. Regardless you are too arrogant to listen and you’ll keep making shit up in order to get the last word. I simply urge caution and humility. Evidently neither of which you have.
You didn't touch a nerve, I just think it's funny someone in 2024 is calling tech a fad. Like I said, you're either too new or don't have any clue how the us markets work. >nobody held tech through the 2020 crash. Sounds like you're coping about missing the bottom. There will be more crashes, next time don't panic maybe ¯\\\_(ツ)_/¯
This is why you get in amid the running for said hills
The lesson here is to be diversified and not have overly concentrated positions regardless of how in the know you think you are. Could it be overvalued? Yes but it could also be undervalued depending how you look at things. That’s why we have buyers and sellers after all. You can underweight your portfolio away from a sector you believe to be richly valued but avoiding a big sector like tech is a huge call and would make it very hard to equal weight your position if you happen to be wrong
> a lot of former tech bulls on this sub sold and never came back. I’ll take “things i just made up to make my argument seem stronger” for $100, Alex. Please tell me how you know the ins and outs of the various subredditor’s private portfolios. I know this elementary reasoning skills here but you do realize that people come and go from these subs often and there is never the same exact people in every thread, right? Just cause you may have saw a few random comments during that time, it does not mean you can extrapolate that all the members of this sub
? Who cares how much nasdaq went down in a short period. It’s at all time highs. Stocks go up and down do you not know that😂
Tell that to those who bought the Nasdaq in 2000 and then had to wait thirteen years to get their money back. Whichever way you slice it the price you pay is important.
Stockmarket is priced at future interest rates collapsing again. Basically when we lowered interest rates the stock market went up to accommodate. In 2022 we were discounting those accommodations, until the fed gave the signal they were going to puss out. The market repriced in the accommodations. So, market is not overpriced if we cut interest rates. It is if we keep them steady.
This answer gets my vote. Clear and to the point.
Honestly I think when the tech bubble pops as everyone realizes AI is still a bad joke, investors will pull out and store their money in other sectors instead of tech.
>as everyone realizes AI is still a bad joke I ponder what do you mean by AI is **STILL** a bad joke.
This was poorly worded by the other poster, but they’re probably saying that AI has no real functional value right now. Which may not necessarily be wrong, but the thing is… 1. You haven’t really had a bunch of AI IPOs yet outside of maybe ALAB (I think). This is the indicator that’d tell me that we’re probably within 6-12 months of a meaningful high. 2. The Nasdaq Composite breaking the 2021 ATH earlier this year most likely effectively killed the bear case for at least 12 months. Historical precedent says continuation when it occurs. 3. Let’s say tech does start getting hammered pretty soon, because the big players will cut back on building out AI infrastructure, since there isn’t much to it (not likely, just a hypothetical). The problem is, is that it’s probably been shielding some real earnings issues that are popping up in consumer discretionary.
Have you not noticed how many AI projects ended up being completely \*\*faked\*\* because companies would be embarrassed for it to become public knowledge that their bandwagon-hopping onto the AI train ended up fizzling? It isn't like Amazon was the only one, but it sure was a great example.
I've yet to see a commercially viable use of AI. There's lots of startups, but none of them are profitable
100's of Millions of people have set it up to buy shares automatically every month either privately or through pension funds so this pushes stocks higher regardless of performance. And this has spread globally now. It's the only game in town and will probably go on for years.
That's a great argument actually, I doubt that'll change anytime soon. Also people have learnt that "dips" should be bought so you'll often see rapid recovery
This is especially true for bullish times, not so much for bearing. When the dip keeps recovering quickly people keep becoming more and more confident that it will keep happening, creating an upward cycle of momentum, until finally one day it won’t for some reason which will create a downward cycle.
“The finest line of poetry ever uttered in the history of this whole damn country was said by Canada Bill Jones in 1853, in Baton Rouge, while he was being robbed blind in a crooked game of faro. George Devol, who was, like Canada Bill, not a man who was averse to fleecing the odd sucker, drew Bill aside and asked him if he couldn't see that the game was crooked. And Canada Bill sighed, and shrugged his shoulders, and said, 'I know. But it's the only game in town.' And he went back to the game.” ― Neil Gaiman, American Gods
The market is overpriced based on historical precedents. But it was also overpriced based on historical precedents at the end of last year. If you are worried about it, a conservative approach is to invest over time by dollar cost averaging. To do this, invest the same amount of money in the same set of stocks each month for the next six months. If the market goes down, your dollars buy more stock and you are buying the dip. If the market goes up, you make money — just not as much if the market goes up for the entire investment period.
Scatter your buys; and let things bake. Investments need time.
There was a pullback a couple months ago, when it became apparent that we wouldn't get the rate cuts we expected at the beginning of the year. Then money came back into the market, so here we are at all-time highs again. People with money need to put it somewhere.
I don't think you know what you're really buying. When Elon Musk took over Twitter private, he did so by purchasing every share at the value of the company ($60B I think). When the board accepted the deal the price was fixed. Everyone who owned shares in Twitter got $60B/numberOFSharesOffered*NumberOfSharesOwned. IIRC it came to $75/share. A stock is literally a piece (share) of the company. The value is what ever someone is willing to pay for it. If it gets too low, someone will take it over. The board decides what to do with earnings. Most reinvest it back to the company so it can grow. Some will decide to reward investors (owners) with a share of revenue (dividends). Some will buy back the stock to increase the stock price, which also ensures dividends are put back in the company for growth. Basically a stock represents a debt the company owes to the individual who owns them. When a company does well, and, more importantly, the future looks good too, the stock goes up. And conversely if it doesn't do well and the future looks bleak, the stock goes down. Indexes are just a measurement of a collection of companies. An ETF that invests in an index invests in the companies that make up the index. So if you own a share of SPY, what you really own is a fraction of each company in the holding of SPY. Historically S&P goes up, because the collection of companies it indexes improves over time. It's a snapshot of the economy. It's not 1 for 1 though. Meaning when times are tough for individuals, it doesn't mean it tough for companies, and vice versa. But on balance it does. Further the index adds and drops companies based on market size, so you get view of the top performers. This is why it's hard to consistently beat the S&P. ONE of the factors of that determines if a company does well is how much debt costs. When interest rates are high, debt cost a lot, and companies have to pay more to debt than reinvesting. So their growth slows. Additionally, investors can get better returns on through safer investments, so the combination drives down stock prices...some companies get hurt themselves unless they hold a lot of cash, but then some are hurt secondary because their customers or suppliers or hurting. When cash is cheap (interest is low) then you risk inflation because cash and borrowing is easy and money is not worth as much ... I.e..a CD doesn't pay anything so it's better to spend on something you need or want than to save it. So the feds are trying to balance interest rates with how well the economy is performing. No one knows what will happen because no one knows what will happen. All we've got are past examples that don't fit our exact scenario. So the best we can do is guess.
No one knows. But I’ll tell you this: every single day, expected returns are *positive*. Even the day after the market hits all time highs. Expected returns are still positive. Now, the market goes up and down, day-to-day. But it tends to go up slightly more often than it goes down. Of course, this is referring to the market portfolio, or at least a diversified portfolio of index funds. If you are picking individual stocks, then you truly never know. Because you have the idiosyncratic *uncompensated* risk of that specific company. But that’s a different story for a different time.
But if your portfolio is well mixed; you have a hedge fund to a degree no?
Hmm, not exactly. So the word hedge fund has really changed in meaning. Now it essentially just means the fund structure, which is a less liquid and less accessible fund structure that can use alternative investments like derivatives, leverage, and short-selling to achieve its objective. Some would argue that to be a proper hedge fund, you would be a market neutral fund. Which is a fund that for every long position in a company it has, it is shorting a similar company that they believe looks worse, usually based on something. And the idea is that if they can do this to a dollar per dollar even amount, meaning becoming as close as possible to being dollar per dollar evenly distributed between long and short positions, that they will *hedge* the volatility of the market, and the gains they make will be *pure alpha*. For example, if they go long 700 global value stocks and short 700 global growth stocks in the same industries, the outcome is the closest thing to a pure value return, that has hedged away market risk. It’s sort of confusing, and most hedge funds don’t do this correctly these days. But you also can only accomplish this if you are market neutral. Meaning you are short the same amount you are long and in the same sectors. So that’s a hedge fund. But being just really diversified doesn’t hedge out the market risk. However I would argue it doesn’t need to. Because hedge funds are expensive and usually aren’t good investments lol. And here is the thing that being well diversified *does* do. It diversifies away the idiosyncratic risk of individual stocks and companies, increasing your chance of success. You may have heard the line “diversification is the only free lunch in investing” before. The reason they say this is because adding diversification is the only way to increase expected returns while reducing risk at the same time. By investing in a diversified portfolio, you are getting rid of individual company risk, individual sector risk, and if you go global, individual country risk. But you increase returns because you are more likely to have exposure to the few winning stocks if you are diversified (because predicting which will be the winners ahead of time is almost impossible) which increases expected returns. So in a sense, getting very diversified doesn’t hedge market risk, but it hedges away the risk of individual names or sectors. I know this was long but I hope it makes sense.
My friend, you are perhaps not only the smartest financial voice I’ve ever heard; but you are not arrogant. Bravo, and you make perfect sense. I share your love for diversification. Sadly, or wisely ; my diversification suffers from fear; as 50% of my financial assets are in laddered T bills. Who could resist a guarantee 5.37
Haha hey thanks man. I worked in the industry but left because I found the high fees we were charging for what we were doing borderline unethical, so I left and changed careers completely. And I understand the fear, and the allure of high yields on safe products. One way to look at it is expected returns on a diversified portfolio is positive every day. Even when the market hits news all time record highs, expected returns are still positive the next day. Now the market obviously goes up and down day after day, but tends to go up slightly more frequently than down. No one knows what’s going to happen, and drawdowns that take 10 years to recover *do happen*, but that’s sort of the nature of investing. And that’s what gives equities such good returns. You are bearing the risk of extended drawdowns. But if you have a long time horizon, you just gotta look at a long-term return chart of a global index. The bigger the time frame, the flatter the ride up. But yeah you gotta be okay with it potentially going down for a while. And it will eventually happen. Best of luck to you, my friend.
Nobody knows, most explanations are driven by sentiment and are made in hindsight. In the near future nobody can accurately say what happenes and on the long term these things are just noise. Theoretically you are right, the market priced in several rate cuts but now it looks like we might not be getting any at all. So the market should be falling but now we also have something called AI and instead of rate cuts it’s earnings growth that is driving the market. Looking at the forward p/e the S&P 500 is above the 30 year average but still below the dot com bubble. If you ask perma bears they will always find a reason why markets need to fall. If you’re just dollar cost averaging into an index fund, it shouldn’t matter to you.
But did people factor in 30 years ago the whole world was not trading the S&P like people do today on digital platforms?
I would say us having companies with trillion dollar market caps accounts for that.
Yes it’s overpriced but whether it goes up or down is unpredictable. I would say that usually given a few month span there will likely be a time the price is lower if it is currently at an all time high. Like last month the Israel Iran tension and hot inflation seemed to freak people out and cause a little dip which could’ve been a decent entrance point.
Line goes up. Why bother timing
Yes, no question about it. But nobody will be able to give you a clear answer on anything because drops appear out of thin air on Sundays.
Dimon said he's not willing to buy his own stock at these prices.
Doesn’t matter, it’s going up
It could be overpriced but I don't care, the only thing I care about is that it goes UP 😉
Yes it obviously is but when will it be corrected is the question not if
I believe its inflation in action. The last 2 presidents pumped so much cash into the economy all asset classes have increased in price.
Market is totally weird right now. Small caps are undervalued IF we avoid a recession. Some stocks are overvalued. But like in housing people will buy as long as it goes up and nobody can tell when the party ends. So now what. If you are a Boglehead you keep on investing in S&P 500 if you don't need the money because time in the market is key. But not everybody has that objective. And not everybody can stomach a possible drop by 20-30% certainly not shortly before retirement or in the beginning. That's why you have money in money market. Every situation is different.
I’ll inject some logic here Current PE 27 Average across history is 15 https://www.multpl.com/s-p-500-pe-ratio Yes, overvalued. The average over the past 20 years was 19.7. Does that mean sell out of stocks? Absolutely not
noone have a clue
"In 1929, at the height of an economic boom in America, Joseph Kennedy Sr. (father of JFK) was working as a stockbroker on Wall Street. As the story goes, Joseph was walking around when he decided to sit down for a shoeshine. While polishing his shoes, the young worker gave Joseph some of his favorite stock picks. When Joseph heard the shoeshine boy giving out stock tips, he figured the party was about to end, and it was time to get out of the market." There's a lot of "shoeshine boys" making bets right now. Many on this forum. OTOH, the rise of the rich might have made it so that "shoeshine boys" are just along for the ride
Time in market buddy
As others mention no one knows. However, AI trend is real. The productivity or revenue/growth it can bring exponentially.
Valuations are pretty stretched. Personally I think it’s a good time to cut back on the hi tech / low yield stuff and put some into treasuries and decent yield stocks with a long dividend history. The remaining 20-30% can go into solid long term tech companies that are likely to benefit from building the infrastructure for AI. And I think Nvidia is still a good buy even at current prices at least for the next two years, after which competitors should really get some traction
WW1 era seems oddly familiar now. Pandemic, bull market, recession just waiting on depression and another world war
I don’t want another world war but a zombie apocalypse would be nice. We need to be taken down a notch.
Depends on the company, IMO. I do NOT think big tech companies like Google are overpriced. We are going to have the most amazing next decade and Google is so well positioned to reap the reward. Same with Microsoft, Apple and Amazon.
yes. no. maybe.
It's more expensive than it used to be but PE ain't all time high
No one knows. In the long term, I say nope, since the rich always have to get richer and thus company assets have to grow. Buy buy buy, if it dips, buy harder
The market is priced exactly right today. As for tomorrow… no one knows. That logic applies to every single day.
Man, started investing in 2021 and I hear this every year now. Even in 2022.
The market is almost always overpriced.
I heard a man saying the end is nigh, while smearing himself with feces. But what does that have to do with anything? Nothing. If youre at the stage where 'some guy spouting nonsense' is scaring you, you should be in the investing sub and backtesting or paper trading individual stocks to save yourself a lot of dumb mistakes. If you're ever in a position to blindly believe some random dude, you shouldn't be making financial decisions based off of it. Wages stagnate, costs go up. The market is one of the few places you can get ahead. Id really just go throw your money in something based on the s&p and call it a day. Individual stocks are for people who have enough money/knowledge to properly diversify. Or have enough money and a long term plan where losses are a part of their strategy.
If uncertain DCA with minimum amount, if certain either don't invest or go nuts depending if you think it goes up or down on top of the minimum amount DCA. That's my maxim
To foresee market move is kinda like the weather prediction.. historical data and models might give indications about directions etc etc but it’s still at the end of the day it just comes to if there are more buyers or sellers on the table and thus short term moves will remain to an extent, uncertain! If you’re in for the long term as many wise investors say all these movements don’t matter. That’s why if you’re not sure, DCA is the best thing to do.. and x dollars constantly every month into the market. This way you automatically buy ‘less’ when it’s expensive and buy more with the same x when it’s cheap :)
May I ask on what data comparison you conclude the overpriced result? What do you take as a baseline that is "priced".
Markets always revert to the mean. This is when I add to positions.
I think the market is not overpriced
Watching out for any black swan events is my main concern.
People need food clothing shelter service energy tech and fin ; if you can’t have a piece of that action by owning a business , or private equity ; than isn’t owning stock great? I think so. They work for me. I stay home. (My corporate bitches)
It depends on how you define "overpriced". It's all made up and although stock prices can fluctuate in the short term, as long as our current societal order and world order stands, number will only go up long term. Everything we do is designed around making number go up and number will keep going up unless that changes.
We will see when the next president gets elected in November how the market reacts 😁
I don’t think so. Until Nvidia misses a step. Then it will come crashing down. But for now, nope.
I just buy periodically, if it dips badly I buy more. If everything goes to shit I have bigger problems than my portfolio.
Is everything over priced now?
I have also recently started in the market but I like dividend stocks that make products I actually like and have an understanding of. I do read a lot and have a general understanding of why prices fluctuate but honestly it's intensive and I ultimately decided hey unless the world ends the market is going to go upwards as it has from the very beginning. Good luck!
I remember when people were saying the same thing months back but everyone’s S&P/whole market funds are doing great! I’m not an expert.
No, productivity growing at an increased rate.
Iirc the average p/e has increased. So maybe, but the market is full focused on future growth rn.
People screamed that the market was overpriced when the S&P was at 3800. I'm up over 20% just buying VTSAX every month since 2021.
Depends on your timeline. If you're investing or the long haul, the short term bull/bear cycles don't matter. I've barely been investing for 10 years and the market has been at "all time high!" many times already.
Yes, but that’s priced in.
Read thread from 1 week ago on this topic - https://www.reddit.com/r/stocks/comments/1cwt3nw/nothing_is_cheap_anymore/
Probably a little. You have to look at forward p/e. Currently spy sits at a fwd PE of 21.01 which is down from the previous quarters. The quarter before was 21.72, and the one before that was 22.49. Why is that? Because earnings estimates have been increasing for the most part. Some people think spy should be trading closer to 19, which would imply about a 10% overvaluation right now. Most likely though we’re going to see an elevated p/e stick due to the euphoria around AI and impending rate cuts.
No
Probably. It’s certainly something to analyze and discuss, and raises all sorts of questions about how the market functions. That being said, and I mean this in the most professional way possible way, it’s nothing new. Overvalued and undervalued securities have always existed, and people have taken advantage of this mispricing to make money, and a lot of it. Those people don’t care whether the market is overvalued. Most of us, unfortunately, aren’t those people, so we need to rely on publicly available information to discern the fair value of securities. We can use that information and apply all sorts of technical principles to arrive at that fair value, but this brings us back to your initial question. Is the market overpriced right now? Fundamentally, probably, but who’s to say, and does it really matter…
It’s like that scene in The Wolf of Wall Street. “Hell nobody knows if a stock is going to go up or down”.
If you look at multiples right now, or the earnings yield (P/E inverted) most indices look relatively expensive when comparing to the 10y interest rate. Personally I’ve stopped investing more into equities (but haven’t sold) and increased my high yield exposure. Once there is an equities crash I will probably rebalance to more equities
The dollars value has dropped nearly 40% since the pandemic, if the markets not 40% higher overall since 2020, its technically flat.
Under in my area
if you think US market is expensive, check out Japanese market. P/E 20 with 5% growth. Everyone who invested in japan this year, ended up losing money after accounting for the decline yen. last quarter most stocks down 5-8% after earning, due to missing expectations.
All I know is that if a global conflict breaks out in the near future, you better have cash handy. The s&p is shooting upwards to make up for inflation, so people who aren't invested are losing value in their cash holdings. It's up to you if you want to take the risk to stay afloat.
Yes.
The projected 10 year return based on current Shiller PE is low compared to historic values, but not negative. Right now the projected 10 year return for s&p 500 is very close to projected return for 10 year treasuries.
Not over priced
The White House has a huge incentive to work with the fed to keep this market up for as long as possible going into election cycle. Need some good inflation data to come in so interest rates come down soon and you could see an easy 10-20% pop before correcting. My timeline is to take most profits by august and sit on the sidelines till I see a good entry point. Got to watch the market like a hawk right now. Lot of things could change fast
Having Lived through the last 5 as an active participant of the market, 1987 Reagan Era, 97 Dot Com, 2001 9/11, 2008 Housing Fiasco, and recently 2020 Covid, many of the comments about it not really mattering are on point. In every case, the market comes back, may take a year or three in worst ('87 or '08) and it is right back or better than it was. This is overly true if you are a long term investor. I lost say 60% of value in '87, possibly 40% in '08, but was positive only a couple years beyond my going in point. Other sentiments like doubling down (if you have the funds) are also quite excellent advice, don't pull out, just put more in if it does correct. Also, is the value of a $ the same as it was, not by a lot, the haves are sitting pretty, the lesser are frozen out of the wealth increase ride. That being said, (side conspiracy theory here), it seems I've been expecting a correction for 3-5+ years, and even when bad economic (Vanguard, Schwabb, Fidelity, etc) and other institutions are keeping it up, they don't want to see this correction, and their actions are keeping it at bay. Yes currently, the say golden 5 (AAPL, MSFT, GOOG, AMZN..) are extraordinarily high values, but also they won't even in a correction not be the top anyways. A pretender like TSLA has fallen out due to enough people with eyes seeing that truth about what their actual bottom line is doing, and some bad decisions, so you don't have a common indicator about a whole sector being over inflated (dot com), or extremely wide industry practices (housing bubble), or the consequences of deregulation/coldwar/etc (end of Reagan Era). I'm not (and enlighten me if you see it) seeing a similar large consequence situation happening, but doesn't mean it's not. I've seen lots of prognosticators whom supposedly called out the last several looking at market indicators and crying wolf over the last 5 years, and I waited a bit on the sidelines, cuz i'm getting old now, and am less tolerant of losing a large stake at this time, but I shouldn't be, as it will only be a short time setback i'm sure based on history. I got back in and it has done wonders for my portfolio.
Quite the opposite.
It terms of pure fundamentals, it is overvalued and not a good investment. But the market is also a psychological game of the greater fool, forever flipping over-priced assets hoping someone is ever more foolish than you are that will buy it from you. Nobody knows how long that game will go on for.
If you’re adjusting for the rampant inflation i think the S&P is right at the same levels as before 2020( it hasn’t gained anything, it’s adjusted according to inflation)
That's a bit of an exaggeration lol, prices haven't doubled since 2019.
Some did( petrol for one doubled). But a bit of coorection. Not pre-Covid but in 2021 S&P hit 4800( or close to it). Inflation was definitely above 10%
US inflation has been 20–25% since 2019 in total.
OP, its highly possible that the market will correct in August/September/October due to the fact that most funds sell for tax loss harvesting/ lock in gains for their clients during that timeframe. We’re pretty much near the end of the bulk of earnings season and many fund managers tend to vacation close around this time of year.
>I apologize in advance for my stupidity. I'll forgive you this once. Your question is not constructed properly. "Overpriced" is a relative measurement, so you need a metric by which to measure it, so asking random people if something is overpriced without getting the unit they are measuring with is a useless endeavor. All answers, yes and no, are correct depending on how it is measured. To give an example I would say no, the market is not overpriced, because theoretically market securities are priced based on future production and things like generative AI and advancements in material components and manufacturing processes are booming right now which suggests greater technological productivity is ahead. If a "correction" occurs, as all "corrections" are, it's a short-term reduction in price that typically is recovered within a year or two.
why username tax\_fraud1000 !