I'm up 7.9% since the U.S. Presidential Election--who woulda thunk

[hgm735]

You guys are doing much better than I did. In 2016, I was fully invested with nearly 100% stocks - didn't even notice the >10% correction. Then, the election and inauguration happened, didn't sell. But in the beginning of Feb, I went completely bonkers and devoured every single news article out there. Turned from B&H to market-timing. Now, slowly trying to stay the course!

 

[audreyh1]

There's something to be said for using P/E10 to adjust allocations. Doing so can leave you on the "wrong" side of the market for a long time (a decade or more), but it has historically produced better results and better rewards for the risk taken (higher Sharpe ratios). I would not use P/E10 as a binary in-out signal to sell all stocks/go 100% stocks, but using it to adjust your stock allocation up or down 10-15% from a central value seems to have merit.
We had a good discussion on this here, with links to papers. Of course, it might not work at all in the future.

I may end up doing this. But honestly, I would probably only swing between 50% and 60% equities. And I calculated after a big drop that would maybe save me 2%. Still - that's half a year's income! And I would probably feel a little less anxious as the market climbs like it is doing right now.

 

[samclem]

I may end up doing this. But honestly, I would probably only swing between 50% and 60% equities. And I calculated after a big drop that would maybe save me 2%. Still - that's half a year's income! And I would probably feel a little less anxious as the market climbs like it is doing right now.

2% on the way down, but also the benefit of buying cheaper shares if the PE10 dips below the trigger to prompt a purchase up to the higher end of the "window," right? That's worth something.
The papers (by Kitces, Pfau, others) indicated the need to do any additional buying or selling would be fairly infrequent--usually more than 10 years apart, IIRC, and it seemed to work well. As mentioned in the linked discussion, one attractive thing is that it is "wrong" for so long that it wouldn't be an attractive tool for most money managers. But it might be attractive for those of us who have to answer to no one but ourselves.

 

[audreyh1]

2% on the way down, but also the benefit of buying cheaper shares if the PE10 dips below the trigger to prompt a purchase up to the higher end of the "window," right? That's worth something.
The papers (by Kitces, Pfau, others) indicted the need to do any additional buying or selling would be fairly infrequent--usually more than 10 years apart, IIRC, and it seemed to work well. As mentioned in the linked discussion, one attractive thing is that it is "wrong" for so long that it wouldn't be an attractive tool for most money managers. But it might be attractive for those of us who have to answer to no one but ourselves.

Good point.

I picked 60% equities if PE10 got down to 18 or lower, and 50% if PE10 reached 25 or higher, with a sliding scale in between. I would normally apply it in January when I usually rebalance after taking my withdrawal.

I created a spreadsheet to see how my allocation would vary each year.

 

[brucethebroker]

I wouldn't touch it with a 10 foot pole, but look! I found these on sale:

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Well done!

 

[gcgang]

So with all the press about the pending doom of the US economy that was certain to follow the election you didn't cash out and stock up on gold and ammo. Me too.

I'm still buying gold (and ammo, if you call cash reserves ammo).

 

[target2019]

I'm still buying and rebalancing according to our AA.

 

[ponyboy]

If you hate money then go ahead and sell, lol. If you love money ignore the chatter and stay the course.

 

[Badger]

We are not in the accumulation phase but rather safeguarding our retirement since the older we get there is a limit to our ability to recover over time. As long as we are ahead of inflation then we will stay in great shape. About 55% stock, 30% bond, 15% cash. Wellesley, Wellington, individual stocks, and cash with dividends going to MM accounts. As I see it as an unsophisticated bear of little brain the stock market appears to have been on an uphill climb for about 7 years so I'm taking some earnings now while I have them. Just trying to buy low and sell high. I may not realize as many gains as we go forward but as I have frequently read here - nobody has a crystal ball to know when the market wind changes but what we do know is that at some point it will. 7+ years is getting to be a long time for the Bull. If the market does change course then we have the option to buy low again if we choose.

Cheers!

 

[MichaelB]

I think it's less effective when "outlier" years are present (such as right now where the outlier "great recession" is still part of it). Given the equivalent market conditions 2 years from now, the PE10 would look a lot more attractive right?

I don't believe so, but am not going to try and make a case either way. Anyone interested can see the summary data here http://www.multpl.com/shiller-pe/table

 

[LOL!]

It didn't matter what the outcome of the November election was because the election removed all uncertainty of the outcome. Stock markets do not like Uncertainty and do not go up during times of Uncertainty. So when Uncertainty was removed, the only direction was Up since the Economy had been doing well.

 

[DEC-1982]

I don't believe so, but am not going to try and make a case either way. Anyone interested can see the summary data here Shiller PE Ratio by Year

That is a good link. I notice PE10 (by year) has not been below 20 since 1993, except once during the Great Recession.

 

[samclem]

That is a good link. I notice PE10 (by year) has not been below 20 since 1993, except once during the Great Recession.

That 2009 "exception" lasted for about a year and has proven to be a darn good point to have bought into the market (or to have increased stock allocations).

 

[easysurfer]

Took a snapshot on November 9th and just looked a my personal performance through April 4th 2017. Up 7.9%. Not making a political statement but I'm sure glad I stayed the course vs. a panic attack. I was expecting a downturn of sorts. Asset Allocation is 70/30. Cheers.

Sounds nice, but plenty of time left in the year for a correction.

But not that I'm timing. Not my approach. Just saying .

 

[David1961]

I'm up a similar amount. Amazing. But I think a correction is on its way- and I would have felt the same regardless of who won the election.

 

[jimbee]

It didn't matter what the outcome of the November election was because the election removed all uncertainty of the outcome. Stock markets do not like Uncertainty and do not go up during times of Uncertainty. So when Uncertainty was removed, the only direction was Up since the Economy had been doing well.

+10^9

 

[HFWR]

It didn't matter what the outcome of the November election was because the election removed all uncertainty of the outcome. Stock markets do not like Uncertainty and do not go up during times of Uncertainty. So when Uncertainty was removed, the only direction was Up since the Economy had been doing well.

Though I'm uncertain that uncertainty has been removed...

 

[W2R]

Though I'm uncertain that uncertainty has been removed...

I'm sure uncertain. The financial columnists always seem to feel completely certain about what is going to happen, but then it never does turn out like they predict. I take what they say with a grain of salt. No, with 700,000 tons of salt like in this photo.

 

[supernova72]

It didn't matter what the outcome of the November election was because the election removed all uncertainty of the outcome. Stock markets do not like Uncertainty and do not go up during times of Uncertainty. So when Uncertainty was removed, the only direction was Up since the Economy had been doing well.

OP here.

Interesting perspective in regards to "removed all uncertainty". I'm actually less certain what lies ahead due to the election outcome. Having said that, I'm staying the course with my current 70/30 mix. I certainly do not expect this ride up to continue for the rest of 2017---even though that would be a good thing.

 

[samclem]

It didn't matter what the outcome of the November election was because the election removed all uncertainty of the outcome. Stock markets do not like Uncertainty and do not go up during times of Uncertainty. So when Uncertainty was removed, the only direction was Up since the Economy had been doing well.

Perfectly valid retrospective analysis--there might be a spot for you at CNBC! Knowing that any election result would produce a big run-up, I'm sure you leveraged to the hilt and bought options on the broad market indices. It's a "can't lose" situation!

Oops, wait never mind. I see here that you expected the markets to go up when the uncertainty ended, but you didn't jump in with both feet. Or one foot. Or a pinky toe. Some bonds paid dividends just before the election and with the extra money you bought . . . more bonds. Well, heck. Anyway, it's big of you to post your moves for all to see, and few of us did any better than you did--the scaredy cats did a lot worse.

 

[supernova72]

Perfectly valid retrospective analysis--there might be a spot for you at CNBC! Knowing that any election result would produce a big run-up, I'm sure you leveraged to the hilt and bought options on the broad market indices. It's a "can't lose" situation!

Oops, wait never mind. I see here that you expected the markets to go up when the uncertainty ended, but you didn't jump in with both feet. Or one foot. Or a pinky toe. Some bonds paid dividends just before the election and with the extra money you bought . . . more bonds. Well, heck. Anyway, it's big of you to post your moves for all to see, and few of us did any better than you did--the scaredy cats did a lot worse.

Now that was funny!! "that you expected the markets to go up when the uncertainty ended, but you didn't jump in with both feet."

 

[samclem]

Now that was funny!! "that you expected the markets to go up when the uncertainty ended, but you didn't jump in with both feet."

I hope LOL can take a little joshing.

 

[audreyh1]

One thing to remember - is that the markets did a little dive right before the elections too. So it you go back a couple of weeks, a chunk of that rise is smoothed out.

 

[LOL!]

Now that was funny!! "that you expected the markets to go up when the uncertainty ended, but you didn't jump in with both feet."

I wrote about jumping in with both feet in this post on Nov 6, 2016:
http://www.early-retirement.org/forums/f44/timing-the-market-and-elections-84034.html#post1797565

and in this post:
http://www.early-retirement.org/forums/f44/lol-s-market-timing-newsletter-57042-65.html#post1797827 and the follow-on posts, such as:
http://www.early-retirement.org/forums/f44/lol-s-market-timing-newsletter-57042-66.html#post1798753

Samclem's link to a post of mine was from 2012, not from 2016, but it really doesn't matter.

And y'all can always let me have it. I'm an adult and I can take it.

 

[tmm99]

One thing to remember - is that the markets did a little dive right before the elections too. So it you go back a couple of weeks, a chunk of that rise is smoothed out.

I remember that.. I was bracing for the worst when I saw the dive (The DOW future looked bleak...) so I was very surprised it ended up on the positive note.