To get things moving, from a long term investor's perspective, and using the S&P 500 Index as the market proxy I rate it a hold based upon valuation. I am finding that stocks are selling on a trailing twelve month reported earnings at about 22.3 and on forward estimates at 18.4. Notice the spread between reported and estimates, it is better than twenty percent. I am thinking, forward estimates are overly optimistic especially with the FOMC broadcasting a rate increase and stocks are currently meeting a strong dollar headwind.
I wonder what you might be thinking?
A trailing comment (10/31). It seems, from reading the comments, most are of the thought that the market is currently a hold; however, it seems one can find value if they look. Also, there is good reading to be found in bee's below comment as how one might wish to position going forward over the next couple of years. With this, just follow the link in her post to read Dr. Madell's thoughts on positioning which are contained in the most recent edition of his Mutual Fund Research Newsletter.
Thanks to all who made comment.
Do I think there are specific opportunities here and there? Sure. I added to Gilead (GILD) the other day after it beat EPS and revenue by a mile and still went down after. Gilead trading at a 10 p/e? I don't even think about it on a day-to-day basis, really. I don't have a long list of ideas, but yeah, I think there are opportunities here-and-there.
I think some MLPs are opportunities after the situation going on with Kinder Morgan (KMI) has had an effect on pipeline co's.
Speaking of, anyone interested in buying the new Kinder pfd shares yielding 9.75%? I'm going to say no but I thought maybe some on here would be interested.
There are other odds and ends but I'm not overly enthusiastic. I have no plans to sell core holdings, but may add a little here-and-there to specific names.
My two cents' worth: the market isn't cheap, and this bull market is closer to its end than its start, but interest rates are likely to stay historically low (even if they go up a little) and a recession isn't in sight. So I'd say it's a hold, and I'd even buy on dips, with the eternal caveat that unexpected economic crises and/or market corrections always happen now and then, so it's a good idea to have dry powder and a reserve fund.
Of course it depends on what you're buying, selling or holding, time horizon and other circumstances. Equity investing, especially in retirement, is risky - a risk I accept in return for possibly staying ahead of inflation. My time horizon is 10+ years. If someone's is shorter they probably shouldn't be in equities.
Is the U.S. stock market broadly speaking over-valued? From a historical perspective I think not. Of course stocks could plummet 30% overnight as has happened before. That's the risk we as investors accept every day. A well diversified portfolio, however, including equities, bonds, cash-equivalents and a few hard assets should hold up a bit better.
Link #1 shows the DJI Historical Milestones. Link #2 explains The Rule of 72. Historically, equities have tended to double about every 8-10 years. During the heady '90s the Dow first attained the 9,000 level in April 1998. Today, 17 years later, it hasn't yet doubled. I don't think equities are cheap by any means. But from a historical perspective I don't think they're extraordinarily over-valued either.
If anyone reads my posts they know I largely eschew equity funds in favor of more conservative balanced/hybrid types. That has more to do with age and risk tolerance than with any overarching concern over valuations.
Thanks for asking. Regards
Link #1 Closing Milestones DJI https://en.m.wikipedia.org/wiki/Closing_milestones_of_the_Dow_Jones_Industrial_Average
Link #2 Rule of 72 http://budgeting.about.com/od/budget_definitions/g/Double-Your-Money-Rule-Of-72.htm
My aunt likes to brag about what a financial whiz my uncle is. He pulled all their money from the market in late 2007, near the top. However, she never mentions that he neglected to ever get back in the market and has thus sacrificed long-term gains based on a (generally correct) sell decision that was never followed by a buy decision. (And they have a long time horizon and had no need for the money in 07).
I attempt to implement a Lazy (asset allocation) Portfolio. I rebalance in mid August and mid February. At a top level, I track assets by
Fixed Income 45%
As of today the largest difference between current and target allocations is International Stocks at 20.45%, just 0.55% below target. So overall the portfolio is well balanced, thus a HOLD status.
As a point of interest, I started a small experiment and bought shares of VFIAX on 9/10/2015; yesterday, 10/29/2015, they had gained 7.26%.
"What this suggests is that the best opportunities for investors for the next several years would appear to lie in US stock funds that are classified as Large Value. Many Large Growth funds, if this analysis is valid, are likely to perform less strongly than Large Value funds because investors may have already realized most of the performance benefits of this category and are more likely to find both a greater degree of safety in Large Value funds when market conditions are no longer as bright, and a greater degree of return potential due to their less overvalued composition."
One question though. The "value" that worked last time was financial stocks. Is time around where is the value? What section of the market is the fed going to pump up next?
I'm thinking, following your thinking and question of not knowing exactly where in the value spectrum the next hot spot will be? Well, I am thinking of picking three low p/e funds to play this theme and let the fund managers decide how to position. I currently hold a few low p/e funds already so I may just add to these rather than picking new ones although I may venture back into BWLAX and HWAAX as special positions (spiffs). In addition, I am still holding a good amount of cash, currently at 25%, within my portfolio's asset allocation. Usually, a large cash position goes in step with value positioning and is often associated with taking a defensive posture within one's portfolio.
For now, I'm still pondering while keeping my allocation to cash elevated.
What sources have you found give you helpful P&E data?
AAII had an interesting article on the many flavors of P&E.
Will the Real P/E Please Stand Up?
would not be surprise if market tank 20-30% until next few quarters
still buying bonds here and there in private account...
bought t-mobil recently [bonds YTM~ 6.7%] bb- rating not bad cusip 87264AAM7
I have a few sources that I frequently use concerning P/E Ratios.
One being ...
And, another being ...
Notice since my opening post that the P/E Ratio for the S&P 500 Index on a TTM (as reported) basis has risen to 22.65 while forward estamites now have a reading of 17.89. This computes to a spread of better than 25% for market close of 10/30. For me, this is kinda chilling. I am still with my thinking forward estimates are currently set way to high and will, over time, be revised downward.
There are others sources but these two should be very helpful and easy to reference.
At 70+ I've gone almost full auto-pilot - with 80% "not to touch" come hell or high water. That portion's pretty conservatively placed except for a small allocation to hard assets. The remaining 20% is currently split 50/50 between a couple equity funds and cash-equivalancies. (That portion I can still monkey with a bit.)
I'm not touting this approach for anyone else. But, I will say it's a lot more relaxing than constantly trying to decide whether I should be buying or selling something. (Tends to be sleep-inducing most days )
And I have quite a bit of confidence in most of the managers who are investing that 80% for me.
Longer term, equity markets always go up. We just need to be sure we live long enough!
On the topic of this thread I'm with Scott. There are almost always values to be had if you're interested in them but the market as a whole is not all that appealing. I'm primarily looking at Pipeline MLP's (i.e. not those companies/MLP's in the oil & gas exploration and production side but rather the toll roads they flow through) and certain healthcare biotech stocks which have been slapped around as of late.
We keep reading "past performance is not a indicator of future results". However, we are very selective about when we believe that and when we don't. Hindsight is always 20-20. The only thing that is certain is Death and Taxes. Not Investment.
JMHO. I just think individuals should form their own conclusions and take responsibility and not let financial press tell us what to do. The ONE reason I'm sure off around the "Long Term markets always go up" theory is it is created by the Investment Management industry to make sure they always attract enough assets from individuals to make money management fees on.
I also think it's a hold. The double BTM was really bullish, but the dippers did their thing again. I was looking for a slower rise into the holidays as a building of support. There are things that need to change to get me to be bullish again. One: the dollar needs to drop to get this market to really move again. Two: the interest rate thing needs to get done now so we can move on. Three: certain parts of the market are still struggling with no end in sight. Until they stabilize, I see no great up side. Are there exceptions to these things? Absolutely! But be wrong and you'll pay a price. With Draghi, Japan, China and others all easing, I'm thinking we're losing the race to the bottom. I really thought mid and small caps would pop this year, but.....no cigar. Funds I'm watching right now to buy on weakness: BPAUX, GLFOX, GLRBX, and FFBFX. I like the latter the best of them all. I sold a little bit of healthcare. I want to see it go higher before I sell more. It's the greed thing I think......Hey, how 'bout them Patriots???
My financial objective is to maintain sufficient income to enjoy my retirement, becoming richer is of secondary importance. The Lazy Portfolio approach allows me to ignore market timing, technical analysis, fundamental analysis, and other speculative endeavors such as predicting what the Fed will do. All I need to do is pick some well diversified index funds/ETFs. Of course I sometimes can’t help myself and allocate a small portion of my portfolio to “experiments”.
More Lazy Portfolios
As a humorous aside consider Pudd’nhead Wilson’s Calendar for 1894 (Mark Twain):
“October: This is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.”
Also of interest, but not necessarily of value to timing trades:
Really bad down days