The stock market could not be more optimistic. And perhaps not since the dot.com bubble of 1999 – have investors been so sure of the future. Excited by a business friendly government coming to power; lower inflation; consumers continuing to spend – what’s not to like? I can think of one thing…. valuations. If buying stocks today – you’re paying through the nose. And for me – that increases your risk.
The Trump Trade Stalls
Last week when assessing the surge in markets – I offered examples of how market (sector) dynamics shifted. Adding to that theme – I was not overly surprised to read how institutional investors are putting money to work. For example, Bank of America Corp.’s monthly survey of global fund managers indicates that Trump’s decisive win is perceived as a potential turning point for investment strategies. And whilst that could be true – it pays to look at history… what can we gauge from Trump 1.0 (and the impact on markets).
Time to be Greedy or Fearful?
Warren Buffett is famous for saying “be fearful when others are greedy; and be greedy when they are fearful”. Today the Oracle of Omaha sits on a record $325B in cash – a record for Buffett – and over 30% of his entire portfolio. Investor enthusiasm today is wildly optimistic about future growth and earnings post the election result. And whilst surging prices are a sign of confidence – markets are also notoriously fickle…
Stocks Losing Momentum
Are stocks starting to lose momentum? This week saw the S&P 500 reverse course – its first losing week since early September. Could there be more to come? My answer is yes – perhaps as much as 7-10%. However, it’s a question of timing. Irrespective, paying 22x forward earnings is a higher-risk bet.
For a full list of posts from 2017…