I guess it is a good time to be a retiree living off investments.
Wall Street is loving the CV19 rebound and loose money policies of government & central banks. The S&P 500 is now up an amazing 83% since last year’s CV19 low point on March 23rd, 2020. Globally, stocks are at an all time high.
Still, forgive me if I’m more than a little skeptical as all of the money being thrown around was ‘magically created’ by central banks. Almost 25% of our national debt (since the start of the country 230+ years ago) was created out of thin air in the last 12 months.
The Schiller PE index for the S&P 500 – shown above – now tops 36. That’s about 2x its historical average. The only time the market’s valuation has been this high was right before the dot com bubble burst 20 years ago.
I know the ‘experts’ explain the current exuberance with all kinds of logical-sounding reasons, but I’m still nervous. I thought the market was too high before the pandemic started, when the Shiller was at 27.
No, I haven’t made a wholesale move in our portfolio. We’re long-term investors and have a nice cash cushion to get beyond a downturn. Still, until corporate profits begin to deliver on these very high stock multiples, I’m not going to be surprised by a very big correction.
Sorry for the negative outlook amid the exuberance!
Image Credit: Multipl.com
In my view, Chief, your skepticism is not negativity. Rather, it is reasonable caution. Markets generally revert to the mean. What’s most unusual this time for me is that the “financial experts” of the current administration advocate printing money, as much and as often as desired, unconcerned for future consequences (which concern they claim is unnecessary due to modern money practices). That sounds like baloney to me.
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I think it is insane and I was happy and surprised to hear Neel Kashkari, Minneapolis fed chair, say that this ‘modern monetary theory’ is not an economic theory at all but merely political propaganda.
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While I agree that we should be expecting a correction or another market drop, anytime I think about it I start to fall down the mindset of market timing. I already proved to myself a few times I can’t correctly time the market or pick all winners. Just going to stick to the investment plan and buy and hold index ETF’s.
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Agree – I think a lot of the market’s momentum right now is driven by people simply afraid that they’ll miss out if they sell this bull to early!
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