This market is dangerous
I wasn't in the market in the 1970s, but that would have likely been the only other time in my life, that I felt as I do now. That is, that money in fixed income at 4%-5% is by far better than playing the market. Although I believe fundamentals should be the main guide for buying stocks, I have learned over the years, that technicals can't be ignored. I have done a study of the market ups and downs over the last 100+ years, and have found the following. Every time the market(S&P & Dow only) have both gone up 500%+ from any given point in time, there shortly after ensues a correction of 45%+. Well on March 6, 2009, the Dow was around 6500, and the S&P around 750. The Dow is now up a little over 500%, and the S&P 580% since then. In addition, the bond yield curve has been inverted for about 21 months, and it's predicted a recession 100% of the time over the last 70 years, within 24 months of the original inversion. So there is my technical reasons a major correction is near.
On the fundamental side, the S&P now has an average PE of 21-22 going forward, and regardless of which stocks are more heavily weighted, an average PE of 15-16 is normal historically, unless the the economy is in the beginnings of a huge recovery mode from a recent recession(which it's not). Also we have a situation in the economy which looks like the beginnings of stagflation to me, which was the case in the early 1970s, and lasted over a decade, while the market tanked almost 70% from its previous highs ! Of course, since the average age of those in the stock market is two+ generations younger than the 1970 investors, few remember the pain back then. Even the pain of 2000 and 2008 is not felt by many investors today. Bottom line is, AI is the ONLY reason this market is going bonkers, and I believe it all ends badly over the coming year or so. Then I believe there will be a multiple year bear market, and that interest rates will stay where they are or go higher.
