Stocks are at an all-time high and many people are saying that they are becoming overpriced.
A recent article in the Wall Street Journal reporting on 'short' funds mentioned that fund managers are ready for a downturn, even though they think there is still some room for the market to rise:
Mr. Swenson isn’t predicting an imminent crash. However, high profits, low unemployment and bullish sentiment suggest “things are so good, they can’t get much better, and they could turn very quickly.”
Investors looking for cheap companies nowadays might as well be opening hens’ mouths looking for teeth.
Link: https://blogs.wsj.com/moneybeat/2018/01/12/how-to…
**What do you think? Are stocks as overpriced as people say or are some still undervalued?
Also, do you think short funds are a wise investment, at least as part of a portfolio and as a hedge against a downturn?**
Stocks continue higher, seeking 17.5% return on S&P this year.
Need NAFTA, Infrastructure, Welfare reform, Immigration reform, no nukes.
Bookmarking this post to view on 1/1/19
some meandering thoughts.
hope this helps
It stands to reason that there will be more pain if the market sells off when no one expects it to.
Conversely, when we have a lot of people warning or saying we're over priced, that's a good sign we can handle a decent-sized sell off.
Both are garbage this year
I don’t love investing now. Preferred buying a few years ago.
Valuations are reasonable in just about everything considering where interest rates are.
A recession isn’t coming. No reason for one except global thermonuclear war.
Output gap is shrinking so there isn’t the same kind of catch up growth possible. At some point this year the gain in monthly jobs drops to 100k.
You own stocks until bonds offer an attractive yield.
I cover Industrials and while we are always fully invested, I've been positioning us more conservatively over the past year. Lightening up on the heavy cyclicals and overweighting guys with recurring revenue streams, lower debt levels, stronger sustainable and consistent FCF. The synchronized global growth story has a hold of the markets currently but the thing about businesses/sell-side/central banks is that they're all really shitty at forecasting the business cycle. I'm not trying to time a turn in the cycle but just taking the facts and positioning in accordance with the most probable outcomes. Bear Case: rates are rising (even without the fed), gotta think inflation is going to pick up after this corporate tax cut and with a weaker dollar, China's yield curve has inverted several times over the past year (currently has some slight inversion on the short end) and they have huge debt with a shaky housing market, valuations are at historic highs even for lower rates (depending on your preferred metric), commodities are rising (tend to rally into the end of the cycle, oil in backwardation), crypto bubble (some good, mostly bad), historically low volatility (historically mean reverting), geopolitical risks. I have a hard time building out a similar depth of points that support a global growth bull case. I'm just not buying that after 10-years of free money that failed to generate any real growth, that we are going into a new growth regime with rising rates. What I think we're seeing currently is optimism from the tax cut/deregulation, which has spurred real economic reactions, but will leave us in a precarious position once the shine wears off. The reason that cyclicals get beat up so bad in a downturn is precisely because the related entities suck at forecasting and tend to allocate capital poorly near the top of the cycle. Recessions wouldn't have such a violent impact on the economy if everyone saw them coming.
All that aside, gotta be in stocks right now because you can't get returns anywhere else and the best returns come at the beginning and the end of the business cycle. All I'm saying is be prepared for a swift shift and keep your eyes open for signs of trouble. Specifically keep your eyes on core CPI, its a lagging indicator and the only thing holding the fed back. I think the March numbers will start to show a material pickup and will steepen the fed's normalization trajectory. After that it's only a matter of time.
Great summary, thank you for posting.
Solid take. As a first year analyst, I put off opening a brokerage account and significantly increased my contributions to my Roth and 401k, taking advantage of dollar cost averaging because I've been scared of overvaluation in the market. However, I was also convinced that the market was overvalued at the beginning of 2017, and if I had been more bullish, I would be seeing much better returns (obviously).
Hopefully a correction occurs soon to present an opportunity for us bears who have been reluctant to invest and are looking to buy and hold for the long-term.
Are the bulls getting tired? (Originally Posted: 01/30/2018)
A couple of days ago, I made a post asking whether people think the market will keep going up as we go further into 2018. Some people said that the end of the market rally will come eventually. Well, this might be it:
At the moment, the DOW has plunged about 350 points. The S&P is down about 1 percent. Both were down even more a couple of hours ago.
A lot of this selloff has to do with a rise in bond yields and a decline in health care stocks. Some people are worried that the current market trend is unsustainable, while others think this selloff is due to short-lived worry:
What I want to know is if you agree that the "bull is still running" or if you think this dip is a sign that the market is in for a correction.
As a bonus, let me know what you think about this statement:
Is Trump really that influential in making the market move?
Sources: WSJ CNBC
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