CAPE (Cyclically Adjusted Price/Earnings ratio) is the second highest IN HISTORY at 35.75.
It was ~30 before the Great Depression crash of ‘29.
Median CAPE 10 is 15.89. It’d take a ~55% drop in the market to get us back to those levels from where we are today.
Stocks are going up because of “TINA” - There Is No Alternative. Bonds are yielding less than inflation. Cash even less.
The problem with holding lots of cash is inflation, where you’re “guaranteed” to lose 2-3% (today..probably 4-6%/yr soon) in purchasing power every single year. And we’re likely to see a LOT of inflation (like, 70s level) in the next 2-3 years as Biden and the radical left pump TRILLIONS of dollars into the market to levels never seen before.
It’s taken us 244 years to get to ~$28T in debt. Biden and the far left want to spend nearly a quarter of that between the $1.9T “stimulus” bill and the $2-3T “infrastructure” bill. And God help us if “Reparations” ever come. I read one estimate of TWELVE trillion (!!!!) for that yesterday. WE’VE NEVER, EVER HAD DEFICIT SPENDING TO THESE LEVELS. Inflation is going to go absolutely bonkers, which will destroy the value of cash and bonds. So, “TINA” - the ONLY place to put $$ right now is in hard assets (physical real estate, precious metals, etc) or equities.
That said, I do think equities are going to crash - and crash hard. I wouldn’t be surprised to see a 30-50% (or, God help us..even worse) crash this year or next. “1929, 2.0” is not out of the question IMHO. So, yeah..hang out in cash &/or bonds and lose 2-3% guaranteed per year. Or, roll the dice with equities and HOPE you get out before the stampede starts and you lose 10X (or more) that.
Very, very challenging and abnormally risky times indeed - especially for those in retirement that likely wouldn’t have the potentially decades long period needed for recovery..
As to your comment, "... the ONLY place to put $$ right now is in hard assets (physical real estate, precious metals, etc) or equities."
Land is beginning to sound good. Land in an remote location and off the grid.
Stocks are going up because of “TINA” - There Is No Alternative. Bonds are yielding less than inflation. Cash even less.
This is what I tell my wife who is a farm girl and whose father just put money in the bank. Can’t do that.
Unless you put in stop loss orders on everything you probably can’t get out of he market fast enough either. Is 10% your number? 20%? Probably not higher than that? I have never gotten out, sold some junk at a small down with the covid panic and bought some more of good performers but nothing dramatic, 15 to 18% of the portfolio out in cash for a couple of months. Never bought into the world is going to end panic.
Stocks are no longer a value proposition unless you accumulate divided aristocrats. Outside of that it is just a game, a gamble of emotions mostly. I watch things by the year, not the hour or the day. I have survived inflation of the 70s and 80s.
I hope that as long as I don’t spend more than growth - inflation and a little bit more I’ll be OK. If I ever see 20% bonds again I’ll even sell the mare and buy all I can get for the longest term possible.