The stock market highs

[Montecfo]

Outside of QE and lots of new investors, there isn't any rhyme or reason that makes any sense.

A few trillion of fiscal stimulus? Massive earnings and jobs growth? Record low interest rates make future earnings flows more valuable (this last one I mention perhaps least we'll understood)?

 

[skipro33]

My perspective is that unemployment isn't anywhere near as bad as the media makes it sound. Right now it's 6.7%. In what scenario is that bad? We are only 3.5% off from pre-pandemic levels. The small blip it was bumped to 14.8%, I think most businesses had an inventory they worked off. I've worked in manufacturing and it was routine to lay off after building up inventory as a way to reduce expenses and they did it on purpose; build more stuff than they could sell now, lay off to cut the expenses as they sold off the excess. That is a proven successful business model.
Personally, I can not understand why food lines are so huge with an unemployment rate this low. There weren't from 2008 to 2014 when unemployment was above our current level, so why now?
I also think that because people are unable to spend on entertainment and independent restaurants, they are instead spending money on durable goods; fixing up their homes, upgrading appliances, even stocking up on essential supplies. That's a diversion of money from businesses that are not listed on the stock exchange to those that are.

 

[tdv2]

So I keep rebalancing.

Same here. Just finished up getting back to nominal.

 

[ExFlyBoy5]

A few trillion of fiscal stimulus? Massive earnings and jobs growth? Record low interest rates make future earnings flows more valuable (this last one I mention perhaps least we'll understood)?

And I could cite 10 reasons why is should be at record lows.

 

[pb4uski]

My perspective is that unemployment isn't anywhere near as bad as the media makes it sound. Right now it's 6.7%. ...

Personally, I can not understand why food lines are so huge with an unemployment rate this low. ...

I think the food lines are more indicative of the hurt out there than the 6.7% unemployment rate... let's face it.. people are not going to wait in long lines for hours for free groceries unless they have no other choice. Due to the pandemic, a lot of people have temporarily withdrawn from the workforce and are not looking for jobs since those jobs would put them in peril... so the denominator of the unemployment rate is temporarily understated. Also, many small business employers are gone and those jobs are not coming back or if they do will come back slowly... look at teh number of empty storefronts... there are lots of them.

We will undoubtedly see some pent up demand once the virus subsides from those on the upper right side of the K recovery... but the lower right side of the K recovery will take a lot longer.... and if pre-covid the economy was 70% consumer spending then I think that lower right side of the K will hold things down for a long time to come.

 

[kjpliny]

Real unemployment, if measured properly, is over 25%. If you want to believe the BLS and the MSM fantasy numbers, that's fine.

Alternate Unemployment Charts

 

[ExFlyBoy5]

I think the food lines are more indicative of the hurt out there than the 6.7% unemployment rate... let's face it.. people are not going to wait in long lines for hours for free groceries unless they have no other choice.

This x1000. I volunteer on occasion at a food pantry that is in a rural area. In the last 6 months, the number of participants has more than tripled. A little over a year ago, we were able to let folks pick pretty much anything they would like off the shelves. Today, they have to be rationed. There are a LOT of people hurting out there and you don't have to look to far to see that. I think a lot of people live in a bubble.

 

[wolf]

Tetto. Agree with you. What's happening? Being retired. I just cashed out IRA funds.
a couple of weeks ago.

If I was younger, 20-30yr. Working. Job safe. I'd just let it ride!

As, Warren Buffet said. Sell when people are buying, and buy when people are crying.
Very simple approach. If you can "overcome" humane nature. Which does the
exact opposite.

 

[38Chevy454]

Tetto. Agree with you. What's happening? Being retired. I just cashed out IRA funds.
a couple of weeks ago.

If I was younger, 20-30yr. Working. Job safe. I'd just let it ride!

As, Warren Buffet said. Sell when people are buying, and buy when people are crying.
Very simple approach. If you can "overcome" humane nature. Which does the
exact opposite.

I think the human nature aspect has a lot to do with current market as well as the previously discussed: lack of alternatives, market is future looking, low inflation rate, gov't borrowing and stimulus money, etc. The market does seem to react (over react?) to momentum. Right now there is a lot of upward momentum and FOMO, plus the stories of the high rising stocks that seem to make the news which feeds FOMO more. People want to join in, becomes a supply and demand issue. Therefore rising tide lifts all ships type result. Sure not all stocks rise, but we are talking about overall market here and not individual stocks.

 

[foxfirev5]

I think the food lines are more indicative of the hurt out there than the 6.7% unemployment rate... let's face it.. people are not going to wait in long lines for hours for free groceries unless they have no other choice. Due to the pandemic, a lot of people have temporarily withdrawn from the workforce and are not looking for jobs since those jobs would put them in peril... so the denominator of the unemployment rate is temporarily understated. Also, many small business employers are gone and those jobs are not coming back or if they do will come back slowly... look at teh number of empty storefronts... there are lots of them.

We will undoubtedly see some pent up demand once the virus subsides from those on the upper right side of the K recovery... but the lower right side of the K recovery will take a lot longer.... and if pre-covid the economy was 70% consumer spending then I think that lower right side of the K will hold things down for a long time to come.

Good points made. Also there are quite few out there that got screwed over with the illusion that being a 1099 employee somehow bypassed a lot of taxes. Now many, particularly in the construction and service industries are nearly indentured servants. Pay has shrunk, yet they can't get unemployment.

My Mr Bigshot neighbor previously bragged about having 40 employees. When the SHTF last Spring he was at the trough complaining that since he really didn't have employees he was getting cheated out of gov't stimulus $. All "employees" were 1099's with no benefits. I also suspect under the table as well. Wink and nod if you know what I mean.

However these same workers also don't need to pay the rent or student loans. Maybe it will average out, but I tend to agree that it will be a significant drag down the road. Some will win and others lose.

 

[flintnational]

Well, you could invest in international stocks. The Vanguard Total International Index has a trailing PE of 19.8. But, International has underperformed for years. Don't ask me how I know.

 

[Andre1969]

I have been investing consistently since 1998. I chart my growth and comparing January 1 with the following January 1 for each of the past 23 years I have only experienced two (2) negative years. Those two (2) down years were 2008 and 2018.

That means 1998, 1999, 2000, 2001, 2002, 2003, 2004, 2005, 2006, 2007, 2009, 2010, 2011, 2012, 2013, 2014, 2015, 2016, 2017, 2019 and 2020 (21 years) were all positive investment years for me.

Point being, trying to time the market can hurt the long term growth of your portfolio.

My experience is similar to yours. I started getting serious about investing in 1998, when I finally got a bunch of debt from a bad divorce paid off. I've had three years, where finished out lower at the end of the year than the start. Those were 2002, 2008, and 2018. However, if you count the years where I had a negative return for the year, I have to include 2000, 2001, and 2011. It's just that in those years, the additional amount I invested was greater than the loss.

 

[Montecfo]

And I could cite 10 reasons why is should be at record lows.

I do not doubt that. But I was trying to help you understand the rhyme and the reason from the perspective of the market, to.respond to your statement.

 

[Sniggle]

My perspective is....woohoo, I'm gonna be rich! Who doesn't like to see there investments making more money in a day than they make in a month?

But seriously, there is nowhere else to put money at the moment, and being all in has worked, over the long run, every time it has been tried.

 

[jldavid47]

The runup in the stock market from election day to inauguration day (today) was the largest for any incoming president since... Herbert Hoover! Didn't seem to help him much.

(not trying to e political, I just thought that was funny)

 

[plex]

This is my general investing philosophy:

I remember looking at some numbers and articles, and developed a general rule of thumb, if you are predicting a downturn, you have to be correct within 2 years, or you will lose money, often a LOT of money.

This makes it much riskier and more difficult to time the market, especially when selling, as downturns are shorter (except in Japan). While it is easy to hold aside 10-30% in something fairly safe because you need to avoid drawing down highly volatile assets in a downturn, any money you sell still faces that cliff.

Personally I think it is much easier to tell when to buy, as there is on average a much faster/stronger drive to return to the positive territory, so I do tend buy in heavily after a 1+ year downturn (which means I did basically nothing in the last downturn, I'm also at the most conservative period of my life, the year right before/of retirement). But selling? I generally only do that when I have been into the volatile side for 2-3 years in a positive market to just re-balance my numbers to the generally safe allocation that lets me ride out future downturns.

 

[street]

I do nothing but buy and hold and never have rebalanced in 40 years. It seemed to work just fine for me. One thing about not doing anything is you don't have to worry about if you did the right thing at the right time. Just go with the good and bad and hope for the best. All the accounts are in that AA of 78% to 75% equity and never rebalanced.

 

[Tetto]

I do nothing but buy and hold and never have rebalanced in 40 years. It seemed to work just fine for me. One thing about not doing anything is you don't have to worry about if you did the right thing at the right time. Just go with the good and bad and hope for the best. All the accounts are in that AA of 78% to 75% equity and never rebalanced.

That’s always been my basic philosophy; buy and hold. Save save save. But the special circumstances of the last 4 years, the insanity and uncertainty plus the pandemic, made me re-evaluate. After making everything back plus a nice big chunk from the 2020 correction, I made the decision to move my 401k to cash. I look at it as my let me sleep well hedge against the current insane times we live in. I do have other $$$ in the market including my DW’s 401k, so all is not lost.

 

[harley]

Massive earnings and jobs growth?

Is this part accurate? I haven't been following the numbers, so I don't really know. But I keep hearing talking heads on the news saying we're in the midst of a recession. That doesn't seem accurate with the market setting new highs, but the jobs growth claim doesn't seem right either. And I the earnings numbers only seem like they apply to the FAANG type stocks. Don't we have small businesses shutting down right and left?

I really don't understand either set of claims, doing great or deep in a recession. But the market keeps going up. So that is what it is.

 

[Exchme]

I'll bet things stay buoyant for a while but obviously we can't keep getting multiple years worth of returns each year. To make sure I don't miss the run up but also don't have deep regrets when the inevitable bear finally comes, I've been very conscientious about rebalancing to keep my asset allocation right at my target. The folks making major moves one way or the other could be very right or very, very wrong.

 

[pb4uski]

What in gods name is driving this market? I really don’t get these stratospheric heights we are seeing. I’m 7 years away from “needing” my money and 4 month ago I moved a huge (to me) to cash. I’m just not getting what’s happening; is there another massive crash lurking around the corner? It’s pretty well documented that businesses are not making any money!

You're not the only one:

The world’s top investor Warren Buffett has been waiting for a big market crash for over a year now. In many of his recent interviews, the 90-year-old investing legend has highlighted how he finds most stocks from various industries and sectors to be overvalued at the moment. ...

Source: https://ca.finance.yahoo.com/news/warren-buffett-warns-market-verge-182831643.html

 

[tulak]

You're not the only one:

The Buffett article looks like some serious clickbait. It never says where Buffett said the market is going to have a serious crash. Just that he sold off in some sectors. Lots of innuendo.

 

[Koolau]

While I agree it makes no sense to sell out just because the market is high, I do think it's wise to trim your equities as you age. You have less time to make up a big loss AND, hopefully, you have already increased your stash to the point you have "enough" as I've tried to allude to many times - without much success to this bunch, heh, heh. As always, YMMV.

 

[target2019]

The runup in the stock market from election day to inauguration day (today) was the largest for any incoming president since... Herbert Hoover! Didn't seem to help him much.

(not trying to e political, I just thought that was funny)

Here is a link to similar results. Maybe it's the article you read? In any event it shows results for all presidents going back to 1928.

https://www.marketwatch.com/story/b...in-92-years-ahead-of-inauguration-11611097621

Around this time of year there are enough articles comparing presidents and stock market returns. I view these data bursts as interesting to look at, but no reason to change my asset allocation.

 

[tdv2]

What in gods name is driving this market.

Nobody knows.....many claim to know with theories and analysis....don't believe them. But then again you shouldn't be concerned if you have an AA consistent with your risk tolerance level and time horizon. History has shown us that you are just as likely to be wrong than right about predicting the short term direction of the market. I told this story in another thread when the market was declining in the spring of 2020 but I will repeat it here.

I have a friend who moved away from my area but I still keep in touch. He had a problem letting his emotions and predictions rule his investment decisions and he knew it, he would watch the business news, listen to the sensationalist talking heads and churn his portfolio as a result. He was doing terrible and he knew it. Several years back he decided it was worth it to have Fidelity manage the account and suck it up and pay the management fee. IMHO based on his history, I couldn't disagree with him. Along comes the recent turmoil and what does he do.....he calls Fidelity and demands that they sell everything....they tell him he can't since he has a managed account so he has them change it back to un-managed and unloads his entire portfolio to cash.