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Explorer ○

Are you concerned about valuations of the market?

The P/E ratios are at very high levels across the board.  The value of the stck market to national GDP has never been this high.  Earnings for most stocks are headed downward.  Congress is going after the FAANG stocks.  There appears to be many things to be concerned about.  Corona virus and politicians continue to fight each other instead of trying to solve problems.   National debt is higher than anyone ever expected.  Interest rates are next to zero.

The market goes up until it doesn't.  There are no magical signs that pop up prior to the market falling apart.  Looking for your thoughts.

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Frequent Contributor

Re: Are you concerned about valuations of the market?

Agree 100%. Yes I am concerned about the valuation of the stock market. P/E, CAPE P/E, etc. are all very high, dividend yields really low, and a LOT of “unknowns” about the economy, as well as the recovery from the corona virus, etc. The market has come up a LOT since the lows this spring, and bond yields look like they will stay low for at least a couple of years. 

Since I will be retiring in less than two years, I’m just building cash. Not selling anything, just not adding to anything. If I add, it may be to foreign/ EM, which look “ reasonably priced” compared to US.

Win
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Re: Are you concerned about valuations of the market?


@oldman wrote:

The P/E ratios are at very high levels across the board.  The value of the stck market to national GDP has never been this high.  Earnings for most stocks are headed downward.  Congress is going after the FAANG stocks.  There appears to be many things to be concerned about.  Corona virus and politicians continue to fight each other instead of trying to solve problems.   National debt is higher than anyone ever expected.  Interest rates are next to zero.

The market goes up until it doesn't.  There are no magical signs that pop up prior to the market falling apart.  Looking for your thoughts.


So sell. Move to cash, treasury bonds or gold. 

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Re: Are you concerned about valuations of the market?


@Intruder wrote:

@oldman wrote:

The P/E ratios are at very high levels across the board.  The value of the stck market to national GDP has never been this high.  Earnings for most stocks are headed downward.  Congress is going after the FAANG stocks.  There appears to be many things to be concerned about.  Corona virus and politicians continue to fight each other instead of trying to solve problems.   National debt is higher than anyone ever expected.  Interest rates are next to zero.

The market goes up until it doesn't.  There are no magical signs that pop up prior to the market falling apart.  Looking for your thoughts.


So sell. Move to cash, treasury bonds or gold. 


Exactly. If you are concerned sell. 

I'm concerned about global warming, covid-19, climate change, China, more crime, wars, higher unemployment...but I don't invest based on that :-)

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Re: Are you concerned about valuations of the market?

The downdraft in February-March came so suddenly, but now that things are close to old highs, I have reallocated. I am still about 50% in my effective-equity exposure [in retirement] - I can tolerate any future declines on that, or benefit from any future rallies [to sky?]. But I also know that $7 trillion in market gains are just from about unprecedented $7+ trillion in monetary and fiscal stimulus, not from any smart moves I made. 

Fool me once, shame on the market; fool me twice, shame on me.

YBB
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Re: Are you concerned about valuations of the market?

Yogi "But I also know that $7 trillion in market gains are just from about unprecedented $7+ trillion in monetary and fiscal stimulus,"

More yet to come. A lot of economists (see one link below) are warning about the need to country afloat until this virus thing is over.

Roubini: Trump, Congress are 'playing with fire' by dragging out stimulus talks

Besides, Queen Pelosi and (majority?) leader Schumer will win because I read a story yesterday that, according to McConnel, 15-20 GOP senators will not vote for any deal. He badly needs Schumer to pass anything. I read a story this morning that GOP and White House are softening on $600/week.

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Re: Are you concerned about valuations of the market?

We each have to act according to our own greed and fear. Anyway, I have taken action for me. Good luck to you.

YBB
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Participant ○○

Re: Are you concerned about valuations of the market?

You are not alone in your concerns, although the market always puts on a brave face. Valuations are a major concern and have been for some time. The problem is finding a reliable measure of intrinsic value, that can tell us by how much assets are over-valued. The S&P 500 has a CAPE of 29 (July). Prof Shiller says it needs to be below 20 for meaningful gains. Yet, RSI indicates it isn't overbought. Four bellwether stocks GE, Fedex, Caterpillar, and Google all have price-to-book ratios and DDMs that show they are over-valued. Yet, their PEGs are positive. None is a perfect measure, but when you see the S&P has gained 300% since 2009, it's hard to make the case values reflect anything other than irrational exuberance.

Screen Shot 2020-08-01 at 7.18.18 AM.png

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Participant ○○○

Re: Are you concerned about valuations of the market?

Yes. So when in doubt go to the fundamentals.

We're going to KISS & STC with a 50/50 2 ETF port.

50% TWSM (VWRD)+ 45% TWBM (AGGG) + 5% CASH

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Re: Are you concerned about valuations of the market?

The market will climb the walls of worries, of which evaluation is just another issue.  On the other hand, the market will crash for seemingly no reasons at all.

Thus why be concerned or even react to either?  

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Participant ○○○

Re: Are you concerned about valuations of the market?

I do it because I'm bored out of my mind. As soon as things return to normal I will stop paying attention to the markets and do what I like best.....PARTY!


@51hh wrote:

The market will climb the walls of worries, of which evaluation is just another issue.  On the other hand, the market will crash for seemingly no reasons at all.

Thus why be concerned or even react to either?  


 

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Participant ○○○

Re: Are you concerned about valuations of the market?

I have been concerned about market for last 5 or so years. Many famous value investors have been concerned and bearish on market since 2010.

I guess course of action depends on what stage of life one is in and one's tolerance for declines. I have 15 years to retirement.

Options for me,

1. Stay the course 

2. Reduce exposure to market by 20-30%. ie. Move 20-30% of stock assets into cash.

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Re: Are you concerned about valuations of the market?


@waffle wrote:

I have been concerned about market for last 5 or so years. Many famous value investors have been concerned and bearish on market since 2010.

I guess course of action depends on what stage of life one is in and one's tolerance for declines. I have 15 years to retirement.

Options for me,

1. Stay the course 

2. Reduce exposure to market by 20-30%. ie. Move 20-30% of stock assets into cash.


How well has value investing worked out over the last 10 years?

I sold my value funds and low vol funds in March and replaced them with large cap growth and QQQ. No regrets.

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Re: Are you concerned about valuations of the market?


@oldman
        Ha. Ha. If we're only concerned about investing long term most of that stuff will go away and be replaced by something else. But your mind seems to be made up and you snatched some like minded thinkers others not so much. So what do you do now invest on that? Read a few financial gypsy articles find some that think like that and invest accordingly? Last week tech was going to cave. Not yet apparently. Certainly not forever.
       
        How about the stellar earnings reports just delivered by some well managed tech companies during a horrendous but expected business quarter. Real facts. I invest based on that. MSFT was a high PE stock when invested in during the late 80"s and is worth 225 times more. AMZN another high PE stock purchased during the bank crisis has increased over 600%, 65% this year. My son bought FB at $17, $200+ now.

         *Congress has a regular rotation, tech, drug companies, oil, politicians of other parties etc. Very little ever comes of it but it gives some media attention and another way to spend their income stream. So Medicare, SS and deficits suffer. Apparently it's no big deal.

 

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Explorer ○○○

Re: Are you concerned about valuations of the market?

 

What, me worry?............not till November.

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Frequent Contributor

Re: Are you concerned about valuations of the market?


@yogibearbull wrote:

The downdraft in February-March came so suddenly, but now that things are close to old highs, I have reallocated. I am still about 50% in my effective-equity exposure [in retirement] - I can tolerate any future declines on that, or benefit from any future rallies [to sky?]. But I also know that $7 trillion in market gains are just from about unprecedented $7+ trillion in monetary and fiscal stimulus, not from any smart moves I made. 

Fool me once, shame on the market; fool me twice, shame on me.


Just what is effective equity?

 

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Re: Are you concerned about valuations of the market?


@Intruder wrote:

@yogibearbull wrote:

The downdraft in February-March came so suddenly, but now that things are close to old highs, I have reallocated. I am still about 50% in my effective-equity exposure [in retirement] - I can tolerate any future declines on that, or benefit from any future rallies [to sky?]. But I also know that $7 trillion in market gains are just from about unprecedented $7+ trillion in monetary and fiscal stimulus, not from any smart moves I made. 

Fool me once, shame on the market; fool me twice, shame on me.


Just what is effective equity?

 


It is relative-SD, or the ratio of SD_portfolio/SD_sp500. 

It is also beta/R, i.e.

SD_portfolio/SD_benchmark = beta/R

It accounts for volatility from various sources - various types of stocks and bonds.

Effective-equity % can be 10-20% higher than nominal-equity %. It is NOT the weighted average of component SDs - that overestimates portfolio SD.

PV is the only free source now for portfolio SD.

I have mentioned effective-equity often.

YBB
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Re: Are you concerned about valuations of the market?

After 10 good years where I met my goals and then some I see no need for me to take on additional risk until I see a better indication of where equities are headed. My allocation is well planned for these difficult times. Yes, it's a bit more work, but after investing for some 50 years I feel I'm quite capable of investing wisely. What others do is no concern for me. I just wish them well, as their needs are very likely very different than mine. 

I saw how fast Dow 29,409.33 disappeared and at the same timewas reading the Dow was headed higher. That's a very good reason not to listen to those who know nothing more than you or me. I have no concerns in the least of my portfolio not carrying me and my wife over the course of our lives. Best to play your own hand and ignore investing on another's hype. LOL, what do they know!! There are always the stuffed-shirts that feel they have all their ducks in a row and other investors have it wrong.

Out

 

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Frequent Contributor

Re: Are you concerned about valuations of the market?

 I have no concerns about market valuations. Those who do may have an inappropriate allocation?

veni vidi vici vti
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Re: Are you concerned about valuations of the market?

When there is absolutely nothing whatsoever to be concerned about, and Life, the Universe and Everything could not possibly be any better or rosier, you can be certain that you will earn nothing on your investments because there won’t be any risk.

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