Where are we in the stock market cycle?

[UnrealizedPotential]

With the Sp500 reaching all time highs again, I am amazed how it just keeps going up. It has not been a smooth ride. There have been been bumps in the road. Yet, not that I am asking for a correction or even worse, I can't help but wonder, where are we? I am not a market timer, but I do feel a sense of responsibility to myself if I can ,to understand if the markets are overvalued, fully valued , or if earnings are good, undervalued? Now I know there will be those who say it does not matter. To those who say that, you are correct, to a point. But to get more knowledge we have to ask why things are the way they are. So I am asking.

 

[eta2020]

My guess is somewhere within Secular Bull market. (not cyclical Bull market)

 

[W2R]

I don't know. If I did, I'd be a billionaire I think.

One thing I do know, is that the market has been a rollercoaster for the sixty years that I can remember having followed the Dow. And honestly, despite forum legend, I don't have a clue when it comes to predicting peaks and valleys.

 

[REWahoo]

Where are we in the stock market cycle? That's a no-brainer: somewhere between 1 and 19...

 

[Midpack]

If you're not a market timer, what difference would it make even if someone could tell you? They can't, anyone who tells you they know for sure, is guessing in the end. We'd all be rich if it was predictable.

Price/Earnings ratios are often used as an indicator of market valuation, you can find that online whenever you like, but I've provided a current chart through today for you. What does it tell you? There's no clear "ceiling" and PE can move up or down very quickly as you can see looking at the past.

There's no set length of time for bull or bear markets either. Again we'd all be rich if number of years was predictable.

And "new market highs" are one of the most useless observations of all, selling based on new market highs is outright stupid - it would almost always be a mistake. The market has achieved new highs thousands of times over it's history, doesn't predict anything at all. Obviously none of us would invest if we didn't expect new highs in the future...

 

[UnrealizedPotential]

If you're not a market timer, what difference would it make even if someone could tell you?

Price/Earnings ratios are often used as an indicator of market valuation, you can find that online whenever you like, but I've provided a current chart through today for you. What does it tell you?

And market highs are one of the most useless observations of all. The market has achieved new highs thousands of times over it's history, doesn't predict anything at all. Obviously none of us would invest if we didn't expect new highs in the future.

Because I like to pick things apart. To understand things. How can I understand anything I don't know if I don't ask?

 

[braumeister]

The S&P 500 has not exactly been smooth since the day I retired, but the overall trend is still encouraging.

 

[razztazz]

Some things mentioned around. All with "data" behind them. Not out of a hat. Look them up. I was surprised at at least one that I had never heard of.

Apparently there is apparently a 17.6 year cycle in the US stock market. Even Buffett has mentioned it. The 17.6 yrs down is almost over. Ergo we should see one more correction then "Excelsior!" for 17.6 (or so) years. If this cycle thing is true, hey why fight it?

Some sort of cosmic, worldwide economic "big one" is waiting out there. THEN the bad times will begin. And will last for generations. To me this sounds like hand-wringing and that kind of gloom and doom that people look back on years later and say "Weren't we all supposed to be dead by now"? But I can't count it out.

Unless things change for the good... the VERY GOOD, and soon, and for a long time, the year 2000 retire has had it. 2000 will be listed under 1929, 1965, 1966, 1906. Maybe it doesn't invalidate the 4% rule but throws some huevo on its face. Is a sustained resurgence just around the corner? IAW most 4% rule expectations, yes. Will it be that grand? Probably not. So will it be different this time? Call me in 30 yrs.

I suspect a generational upside turn-around is out there sooner rather than later unless it really is different this time. Will it be another 1982-1999? Probably not unless the name of the game is bubbble...bubbble...bubbble.. like the old, old days used to be.

Now that I've run the gammit and muddied the waters I'm ready for my mid-day interview with CNBC

Does anybody thing that after 15 yrs of general non-performance we are going to keep doing this? If so, must be different this time.

 

[Midpack]

Because I like to pick things apart. To understand things. How can I understand anything I don't know if I don't ask?

They were rhetorical questions actually, and why I went on to explain, hoped it might help...

Trying to piece together an understanding of investing/market history-behavior would be more difficult than most anyone could handle IME. Only after reading The Four Pillars of Investing cover to cover (and other books like it) did I really start to grasp it all FWIW. There are other good books/authors along the same line, Jack Bogle's books of course.

 

[karluk]

There are no metrics that I'm aware of that say the U.S. stock market is undervalued. Traditional PE is moderately high and cyclically adjusted PE is extremely high. But investors have shown a willingness to hold stocks at these valuations, even as the valuations slowly creep higher.

When will it end? My guess is that growth projections will be missed by a substantial margin one of these quarters. That will change people's perceptions of stocks from "expensive but justified" to "not worth owning at these prices". If you can figure out when the next economic slowdown will happen, you'll have a leg up on predicting the next stock market correction.

 

[Beldar]

Greece exits the Euro and ignores its debt. That will start the slide.

 

[karluk]

Perhaps this thread is as good a place as any for me to state my opinion of John Hussman. He is an extremely intelligent man who runs a mutual fund (HSGFX) that has managed to lose millions of dollars for its customers even as stocks have consistently surged to new all time highs.

In my view, Mr. Hussman is too intelligent for his own good. He publishes a weekly market commentary, which I've read off and on for my amusement ever since Mr. Hussman was mentioned in a thread on this site about a year ago. I tend to agree with about 80%-90% of what Mr. Hussman has to say about overvalued market conditions. But for some reason being mostly right did not prevent HSGFX from having another loss in 2014, or the stock market from finishing the year near record highs.

One of these years Mr. Hussman may not only be right about valuations, but also live to see a stock market that agrees with him and plummets to more reasonable levels. Perhaps 2015 is the year. But it doesn't change the fact that betting against the stock market year after year after year has cost the investors in HSGFX so much money that they are unlikely to recoup it no matter how soon the next correction begins.

 

[UnrealizedPotential]

Perhaps this thread is as good a place as any for me to state my opinion of John Hussman. He is an extremely intelligent man who runs a mutual fund (HSGFX) that has managed to lose millions of dollars for its customers even as stocks have consistently surged to new all time highs.

In my view, Mr. Hussman is too intelligent for his own good. He publishes a weekly market commentary, which I've read off and on for my amusement ever since Mr. Hussman was mentioned in a thread on this site about a year ago. I tend to agree with about 80%-90% of what Mr. Hussman has to say about overvalued market conditions. But for some reason being mostly right did not prevent HSGFX from having another loss in 2014, or the stock market from finishing the year near record highs.

One of these years Mr. Hussman may not only be right about valuations, but also live to see a stock market that agrees with him and plummets to more reasonable levels. Perhaps 2015 is the year. But it doesn't change the fact that being wrong year after year after year has cost the investors in HSGFX so much money that they are unlikely to recoup it no matter how soon the next correction begins.

I am not smart enough to pick my own stocks but I am smart enough to find fund managers with an eye on risk. IOW don't lose money.

 

[eta2020]

From the long distance graph of S&P 500 looks to me all up and up and up.

 

[robnplunder]

Wheeeeeee are at the peak and there is only one way to go .... down, then up, then down, then up, then .... In other words, I don't know. Either way, I am prepared. Bring it on.

 

[karluk]

I am not smart enough to pick my own stocks but I am smart enough to find fund managers with an eye on risk. IOW don't lose money.

John Hussman earned his reputation as an investing wizard through the happenstance of starting HSGFX in July, 2000, just as a major bear market was beginning. He made tons of money for his customers in those first few years because his correct call on valuations back then was promptly followed by the stock market correction he was expecting.

So back in those days he was the one who followed your rule to not lose money, while practically every other mutual fund manager was following the market down to its October, 2002, low. You or I or anybody else back then could easily have decided that he had found the secret to successful investing. Sadly, it wasn't true. The impressive gains of his first few years have been followed by one disappointing year after another. HSGFX is now underperforming the S&P 500 over the nearly two full market cycles since it has been in existence.

 

[M Paquette]

Fractal noise, with a slight upward bias.

But, our monkey brains do love to see patterns in the noise. Probably handy for avoiding predators and finding bananas. Seeing something that wasn't there wasn't particularly harmful.

 

[pb4uski]

I don't know. If I did, I'd be a billionaire I think.

One thing I do know, is that the market has been a rollercoaster for the sixty years that I can remember having followed the Dow. And honestly, despite forum legend, I don't have a clue when it comes to predicting peaks and valleys.

If I recall correctly, a storied prognosticator on these boards used the "W" word just last week, which means that a downturn is imminent......

OP, I'm not sure it matters to us buy and hold investors. I rebalanced around the end of 2014 and my AA is still relatively in balance so even if thought that I knew the answer I wouldn't do anything but stay the course.

 

[Ronstar]

I was listening to Larry Kudlow, and he was asked how long the market would stay high. He said that he thought that the bull market would keep going as long as earnings stay up. I agree with him.

 

[HF63]

In this Bull, we can throw out all the previous indicators since the Fed was never the main driver. At very close to zero rates, and all the bond buying stuff from the Fed will make previous markets unlike today's market.


The real question is when is Fed going to raise rates. I very much doubt that they have balls to raise rates since the strength of the dollar is already causing problems for large corporations. The rest of the world is on negative rates which lowers their currency. Any increase in the rates will make the dollar stronger which can be a good thing for traveling. If the SP gets to PE ~ 30 times, any market correction can be a big problem small door and every one trying to exit the market.

 

[Sittingduck]

... where are we?

Historically - we are at the very end...

 

[audreyh1]

With the Sp500 reaching all time highs again, I am amazed how it just keeps going up. It has not been a smooth ride. There have been been bumps in the road. Yet, not that I am asking for a correction or even worse, I can't help but wonder, where are we? I am not a market timer, but I do feel a sense of responsibility to myself if I can ,to understand if the markets are overvalued, fully valued , or if earnings are good, undervalued? Now I know there will be those who say it does not matter. To those who say that, you are correct, to a point. But to get more knowledge we have to ask why things are the way they are. So I am asking.

The S&P500 has been going up ever since it was established.

 

[danwhite77]

When people asked JP Morgan what the stock market would do in the future, he would reply "It will fluctuate."

http://en.m.wikiquote.org/wiki/J._P._Morgan


Sent from my iPhone using Early Retirement Forum

 

[target2019]

Because I like to pick things apart. To understand things. How can I understand anything I don't know if I don't ask?

This blog page is loaded with charts that try to explain cycles.

Psychology Charts & Sentiment Cycles (Updated) | The Big Picture

There is a reasonable explanation of economic cycles here:

https://scs.fidelity.com/common/app...ness_cycle/Business_Cycle_Sector_Approach.pdf

I've re-read that article a few times, and have a better understanding of the forces over which I have no control.

It's all theory, and I believe the progression usually plays out, but the phases are of unknown duration.

 

[Cobra9777]

Fractal noise, with a slight upward bias.

But, our monkey brains do love to see patterns in the noise. Probably handy for avoiding predators and finding bananas. Seeing something that wasn't there wasn't particularly harmful.

Nice post. Fear is a powerful emotion in our species.