Bigworld, Some of the big differences between now and other periods of extreme overvaluation (1987, the Nifty Fifty 1960s/70s, etc) include -
1) The Fed now has the ability to prop up the market via derivatives and the PPT mechanism, which they couldn't do effectively in those earlier periods.
2) The Fed has been desperate not to allow even a 10% selloff since they don't have the 'ammo' to deal with it if it snowballs. Their balance sheet is still tapped out from the 2008 crisis, and interest rates are still extremely low so they can't ease in response to a crisis (historically they need the ability to lower interest rates by 3% to effectively reverse a crisis).
So the Fedsters have been deathly afraid of allowing even a moderate selloff. For them it's an existential threat since there is little they can do to stop it should it gather momentum. I think that's why they've been so diligent in propping up the market all these years.
If the above is accurate, then we can likely expect the Fed to continue engineering a modestly buoyant market, sideways then a little up, then sideways again. If they're able to normalize interest rates in a few years and correct the Fed's bloated balance sheet, then they'll presumably feel less threatened by stock market corrections. But the problem there is, at this point they've juiced for so long, they're afraid of allowing corrections at all since it's such a long way down. So it's a catch 22.
Another aspect is that we know they eventually want to transition to the SDR system, which will presumably involve a big crisis and stock market meltdown. But who knows when this will happen. Another aspect is that financial crises can occur in spite of the Fed's wishes, a debt/banking collapse in China for example.
It's very complex and us small fry can only guess, but it seems logical that the Fedsters will do all they can to keep things stable until - 1) something happens that they don't control, or 2) they're ready for the SDR transition. But in the meantime, with the Fedsters so intent on stability and periodic juicing, there's a big risk in trying to short the market prematurely.
