I'm getting spooked about the markets

[audreyh1]

We're not mind readers you know!

BTW, I agree with the whole notion in your last post... I just didn't get that at all from your earlier post on the market being flat from the January peak.

That was a follow on to the quoted posts preceding mine.

The market has been fairly flat for the last 6 months or so... if anything, this is eating into any potential drop that may be coming. Doesn't always take drops to accomplish regression to more normal ranges - in fact, a flat market is a self correcting one too - we just don't look at it that way, because it stings less - but it's more a methodical slow regression. That is, 6 months equates to an expected (long term average) rise of about 5% in equities, yet despite the economic numbers we haven't see the market continuing to rise.

I don't know. The S&P 500 index is up around 5.5% YTD that's not too shabby.

The DJI (is that what you are referring to as "the market"?) isn't up as much, but it's not a particularly good index to follow. Sadly it's what is most widely reported - it just has better PR that the broader indexes.

But the S&P 500 is not up from the late Jan peak. It’s flat to down from there.

Yes, I know you have to thread through the quoted posts to follow that piece of the conversation!

 

[SpartacusSchmartacus]

i disagree

i suggest most people 'know ' but get tricked into adopting a short term focus ( and so doubt in their abilities is created )

investing is like growing trees ( say a nut or fruit tree ) you know the possible outcomes right from the first sprout

A. the plant will die ( at a time so far unknown )

B. the plant has some chance of producing ( how much and how regularly is unknown ) .. while the plant lives there is always a chance of a positive outcome .

if you need more certainty planting more ( and different ) trees may help

I like that! There are always going to be those that predict the end .. don't listen to them just yet. Markets have a habit of going up and then going up some more. Also the reverse can happen as we have seen.
This time tho the US market is still on a tear ... tax, relief both personal and business, relaxing regulation, the beginnings of keeping our intellectual property (not there yet) real job growth and finally wages are starting to rise becuz of that job growth. Rising wages will spark consumer spending as it always does - this is a bull market still. Look past the Turkey's the NOKO's the trade wars of the world cuz this is just noise.

 

[OldShooter]

Well I used what I could find. Can you point me to a total return chart for the S&P500 starting at Jan 1, 1998? Thanks.

It can be hard. My main benchmark is the ACWI All Cap: I start here: https://www.msci.com/end-of-day-data-search but I always have to hunt around a little bit for the number I want. Too many options.

I have found S&P total return charts on the internet but I don't have any links handy now. Sorry.

With mutual fund fees now at almost trivial levels, though, an S&P 500 fund should be a good surrogate. In fact, I tend to use funds like this as benchmarks because buying the actual S&P is not an option. A fund used as a benchmark is, however, a completely feasible alternative to whatever portfolio I want to evaluate. Portfolio Visualizer is very lacking in index benchmarks, but makes it easy to use a fund as a benchmark.

HTH

 

[audreyh1]

Well I used what I could find. Can you point me to a total return chart for the S&P500 starting at Jan 1, 1998? Thanks.

Another option is to go to Morningstar and look at the Vanguard 500 Index Admiral VFAIX. Click on the "Growth of $10K" headline above the chart and you can manipulate the time line I get value of $42,685.79 which would be a total return of 427% when I enter 1/1/1998 for the starting date.

VFAIX trails the S&P very slightly due to it's expense ratio.

 

[Dtail]

The Dow is up 400 today. I try to only look on up days! Lol.

How do you know it is up to look in the first place? Just playing....

 

[NYEXPAT]

I read somewhere that this is the longest correction since the 1960's!

 

[W2R]

The Dow is up 400 today. I try to only look on up days! Lol.

Wow! I hadn't looked yet. That's terrific!

 

[COcheesehead]

I get research from Bespoke. It’s actually pretty good stuff, but there was an ominous point made in today’s email. If we don’t reach a new near term high, this January’s highs will mark the end of this bull market.

 

[flyingaway]

Today I just moved 5% of the total stock fund to the total bond fund. I have reached FI and don't want to play that hard anymore.

 

[ownyourfuture]

Not spooked about the markets.....yet.......but this defiantly spooks me.
My town in south central Minnesota is growing fast, but new, single family home construction isn't.

On the other hand, there's an insatiable appetite for low-income housing.
The same for other smaller towns in the area/state.

 

[jollystomper]

The Dow is up 400 today. I try to only look on up days! Lol.

You jinxed it by mentioning it, it closed up only 396. Drat.

 

[Al18]

The S&P500 PE ratio as of 8/16/18 is 24.61 according to S&P 500 PE Ratio
The mean is 15.72, which means the S&P500 is 57% over it's mean.

 

[ownyourfuture]

The S&P500 PE ratio as of 8/16/18 is 24.61 according to S&P 500 PE Ratio
The mean is 15.72, which means the S&P500 is 57% over it's mean.

It would be interesting to study the data, & see what interest rates were in past periods when the PE ratio was that much above the mean.

 

[COcheesehead]

The S&P500 PE ratio as of 8/16/18 is 24.61 according to S&P 500 PE Ratio
The mean is 15.72, which means the S&P500 is 57% over it's mean.

There have been times when it has stayed at or above that level for a year or two...and then it corrected.

 

[kcowan]

Another option is to go to Morningstar and look at the Vanguard 500 Index Admiral VFAIX. Click on the "Growth of $10K" headline above the chart and you can manipulate the time line I get value of $42,685.79 which would be a total return of 427% when I enter 1/1/1998 for the starting date.

VFAIX trails the S&P very slightly due to it's expense ratio.

Thanks. That will be close enough.

 

[USGrant1962]

There have been times when it has stayed at or above that level for a year or two...and then it corrected.

Um, it has been above that mean for 22 of the last 23 years - what year or two correction are you talking about?

 

[RockDoctor]

Well I used what I could find. Can you point me to a total return chart for the S&P500 starting at Jan 1, 1998? Thanks.

/http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/histretSP.html has a nice spreadsheet http://www.stern.nyu.edu/~adamodar/pc/datasets/histretSP.xls
The data is annual, which was fine for my purpose when I built my S&P500 backtester

 

[bw5972]

I wish that crash would hurry-up and happen, because I've had $100k in cash I've been wanting to invest since 2013! At least I've been sleeping well the last 5 years.

https://dqydj.com/sp-500-dividend-reinvestment-and-periodic-investment-calculator/

That original 100k would be over 200k in an S&P index fund.

 

[COcheesehead]

Um, it has been above that mean for 22 of the last 23 years - what year or two correction are you talking about?

Not talking about the mean. Talking about current level. It rarely stays above 24.
http://www.multpl.com/table

 

[audreyh1]

I read somewhere that this is the longest correction since the 1960's!

I guess you are talking about this article from May 1 2018?
https://www.marketwatch.com/story/t...ction-territory-in-nearly-a-decade-2018-04-23

We've been out of that correction territory for a while now, I think, even though we are still below the Jan 2018 peak.

Since we've recently been in bear markets far longer than this, it's kind of hard to get excited about a slow correction.

 

[copyright1997reloaded]

Not talking about the mean. Talking about current level. It rarely stays above 24.
S&P 500 PE Ratio by Year

So, eventually the P either needs to come down OR the E needs to go up. Trailing PE's are interesting in terms of looking in the past, but what about the forward PE?

If you believe the economy is gaining strength, accelerating, and the tax law changes have substantially increased earnings, then E will be increasing at a faster pace. If you don't, then P will have to come down to reality.

Yardeni put's together some interesting analysis: https://www.yardeni.com/pub/peacockfeval.pdf

I'm still in the camp of E revisions to the upside, not downside. At least I've thought that since the tax law changes, and so far so good.

Here's a chart I posted on 6/19: http://www.early-retirement.org/forums/f52/tomorrow-should-be-fun-the-trade-war-is-escalating-92420-2.html#post2063673. At that point we were at 2750 on SPX (SP 500). Here is the same chart, with data through today: thinkorswim Sharing.

The good news (for the bull case) is that we continue to gyrate towards the old high, and now what was the ceiling after the Jan selloff appears to be a floor (for example that we tested yesterday).

Psychologically, it is hard to break through the old high because there are still tons of people who bought in the initial steep decline who "just want to get out even". This puts supply into the system as we approach 2875 on the SP 500. Several parts of the market have moved to new highs, but not the overall index.

Today's melt up was done WITHOUT the high flying (new) tech stocks. FB, GOOG, TWTR, TSLA are all well off their highs. AMZN and AAPL are powering higher, but I am starting to believe that they aren't really "tech" plays, but rather some new category, like "tech consumer". It is good that the market seems to be expanding in terms of what it pushing it higher. (For example, today industrial and financial were great contributors and the tech sector was dead last). But it is hard to believe (given the weight of the tech sector) that we can push through to new highs without the tech sector at least participating somewhat.

"The market right now is moving on nothing more than emotions. Guess what? It almost always moves on emotions.” – David Bach

I posted this quote, because I believe in the short run, psychology drives market price action. In the long run, increases in productivity and resulting profit drives asset prices.

Then again, there is also this gem:

“One way to end up with $1 million is to start with $2 million and use technical analysis.” – Ralph Seger

 

[DEC-1982]

We've been out of that correction territory for a while now, I think, even though we are still below the Jan 2018 peak.

It's my understanding that once you go into a correction, after that till you exceed the last high you are still in a market correction.

 

[pb4uski]

Doesn't the trailing P/E only partially reflect the benefits of the tax cuts but forward P/Es fully do?

 

[Oz investor]

as i understand it a 10% ( minimum ) decline from a peak is a correction ,

in theory until you hit a new peak ( after that correction ) you are trading sideways ( or plunging , of course ) calling it a continuation of a correction or a consolidation sounds like it would some supporters .

the peaks and dips are all i worry about , i am about divs and buying ( and selling ) opportunities and a crash is the mother of all buying opportunities to me , while peaks have me thinking about taking SOME cash of the table .

( long term the market trend is up unless a very rare event happens )

 

[audreyh1]

Doesn't the trailing P/E only partially reflect the benefits of the tax cuts but forward P/Es fully do?

Personally I ignore forward P/Es as they are wild guesses.