Stock market correction or bear market/crash? Either way I bailed.

[joe sod]

What a year 2016 has been, 2015 ended badly with an awful lot of negativity then 2016 started with markets in panic and freefall. Alot of the extreme negativity was a result of anticipation of Fed hiking interest rates which they had to abandon due to the panic. Commodities and oil were also in freefall . Yet 2016 ends with fed hiking interest rates to barely a whimper, the stock markets and oil have had an incredible run and the dollar at a decade high. So 2016 would have been a horrible year to be uninvested even though nobody could have predicted that back in january

 

[Gordon Gekko]

Lest we forget, early in 2016 RBS were telling people that the end is nigh and exit doors would be thin on the ground.

Not being invested is the road to penury.

 

[MrEarl]

.....Not being invested is the road to penury.

Whereas investing badly, can get you to penury much quicker via helicopter



... I do agree with the principal that a certain amount of carefully invested funds in the stock market is a good thing over long periods, btw.

 

[PMU]

It is said that the long-term investor should not try to time the market and sure, had I left my funds alone for 15 years I probably would have beaten deposit rates by a descent margin. But it just doesn't make sense to me to continue investing at the top or close to the top of a 6 year bull run, especially when there are so many negative indicators, both politically and economically. Stocks are massively overpriced and there currently seems to be tremendous economic instability. Statistical history suggests that this bull market may end fairly soon, so it seems logical to wait for better value.

Few if any persons can consistently call market tops or bottoms. And what's overvalued to you may not be overvalued to someone else. The original post was made on Sept 15 2015 by landlord who had bailed out of the stock market. Was that a wise decision? The answer is NO. Here are the returns of major indices in that period to date.
Iseq today 6,471.52; 21/09/15 6,182.62, i.e. you missed out on an 5 % gain. Eurostoxx50 today 3,259.24; 21/09/2015 3,076.05, i.e. you missed out on a gain of 6%. FTSE100 today 7,1001.64; 21/09/15 6,108.70; i.e. you missed out on a 16% gain. S&P 500 today (i.e. at time of writing) 2,202.50; 21/09/15 1,966.97 i.e. you missed out on a 12% gain. Commodities (i.e. CRNL.L) about a 12% increase. (Above prices from Yahoo and may not be in EUR.)

It's time in the market that counts; not market timing. If you have a certain investment horizon you need an asset allocation to match that; rebalance when appropriate; and accept the associated risk.

 

[irish_investr]

I think the gains listed above are not including dividends, in which case add on another 3-4%.

 

[joe sod]

If you are starting out and maybe have a small sum to invest maybe 10000 you can afford to be more focussed and take more risk. If for example your 10000 falls to 5000 it is actually tolerable and you can sit it out. However if you have built up a fund of 200000 from successful investments or other endeavours then you are much more risk averse. While it was tolerable to watch 10000 investment fall to 5000 it is intolerable for most people to watch 200000 of investments fall to 100000.

 

[settlement]

It is said that the long-term investor should not try to time the market and sure, had I left my funds alone for 15 years I probably would have beaten deposit rates by a descent margin. But it just doesn't make sense to me to continue investing at the top or close to the top of a 6 year bull run, especially when there are so many negative indicators, both politically and economically. Stocks are massively overpriced and there currently seems to be tremendous economic instability. Statistical history suggests that this bull market may end fairly soon, so it seems logical to wait for better value.

And 20 months later the bull market continues to rage on. Shows the dangers of market timing or waiting for a crash/correction

 

[galway_blow_in]

anyone think the FTSE is a good bet right now , sterling 15% below where it was twelve months ago and the FTSE only about 15% above where it was in the year 2000 , only the u.s markets have had a raging bull market since 2009 , europe is still not much above where it was a good few year ago , germany being the exception

 

[MrEarl]

With regards to the FTSE much depends on your proposed investment period....

If you said 2-years for example, then I would personally be very reluctant to invest in the UK given the issues around BREXIT, but if you said 20-years then that is an entirely different story and you need to take a view on whether you think the British economy will do well in the long run after it leaves the EU.

When it comes to the US, I personally am still upbeat about the S&P500 because it would appear that the US Government will be progressing with their stated policies to create economic activity within the US so should benefit US companies. Furthermore US Government strategies surrounding protectionism, trying to encourage US companies to relocate their operations back to the US from other locations and their interest rate policies need to be considered (there are a few more interest rate hikes expected in the next 12-months so there should not be any surprises, with corporates having factored these increases into their projections etc.).

The Eurozone is the one I am struggling with most, when I look into my crystal ball... at one level, corporate results are relatively good, interest rates are particularly low and the Quantitative Easing (though buying bonds) has put a lot more cash in the EU economies. However, that said, the German's obsession with inflation and concerns about Spanish and Italian debt levels cannot be ignored - both remain significant geographical and economic areas within the EU. Then you throw the likely exit of the UK from the EU into the mix and it's a toss of a coin almost with the most likely outcome being little change one way or the other over the next couple of years.

All of the above is just my own view, definitely not financial advice and sometimes sourced from a person who might be related to Mystic Megg

 

[Gordon Gekko]

With a two year time horizon, I wouldn't invest at all!

 

[PMU]

anyone think the FTSE is a good bet right now

(a) Do you have an investment plan? (b) Does you investment plan have an asset allocation strategy designed to meet your investment objectives? (c) Does your asset allocation strategy include the asset class 'foreign developed market equities'? (d) Are you under or overweight in this asset class? Now you can answer your question.

 

[galway_blow_in]

With regards to the FTSE much depends on your proposed investment period....

If you said 2-years for example, then I would personally be very reluctant to invest in the UK given the issues around BREXIT, but if you said 20-years then that is an entirely different story and you need to take a view on whether you think the British economy will do well in the long run after it leaves the EU.

When it comes to the US, I personally am still upbeat about the S&P500 because it would appear that the US Government will be progressing with their stated policies to create economic activity within the US so should benefit US companies. Furthermore US Government strategies surrounding protectionism, trying to encourage US companies to relocate their operations back to the US from other locations and their interest rate policies need to be considered (there are a few more interest rate hikes expected in the next 12-months so there should not be any surprises, with corporates having factored these increases into their projections etc.).

The Eurozone is the one I am struggling with most, when I look into my crystal ball... at one level, corporate results are relatively good, interest rates are particularly low and the Quantitative Easing (though buying bonds) has put a lot more cash in the EU economies. However, that said, the German's obsession with inflation and concerns about Spanish and Italian debt levels cannot be ignored - both remain significant geographical and economic areas within the EU. Then you throw the likely exit of the UK from the EU into the mix and it's a toss of a coin almost with the most likely outcome being little change one way or the other over the next couple of years.

All of the above is just my own view, definitely not financial advice and sometimes sourced from a person who might be related to Mystic Megg

the ftse 100 is not all that reliant on the domestic uk economy

 

[PMU]

Scary stuff here: https://www.hussmanfunds.com/wmc/wmc170327.htm

 

[willyfones]

What happens to this graph over the next 3-5 years?

 

[galway_blow_in]

What happens to this graph over the next 3-5 years?

anyone who invested in the year 1999 or early 2000 would have expected to be where things are right now , i realise the gains in the nineties were exceptional but the trebling since march 2009 has to be looked at in context i think , that low had been last reached in the last quarter of 1996 which shows how bad things were in 2008 - 2009

if you look at the european markets bar germany , you would have done better leaving your money in savings since the end of the nineties , with regards europe , its incredibly overdue a long sustained bull market , europe is still below where it was in may of 2015 , the rising euro now looks like it might keep a lid on gains , japan is doing well but the yen is falling against the euro so no real benefit to owning japanese markets by the looks of things , shows how important currency is

 

[Brendan Burgess]

What happens to this graph over the next 3-5 years?

What would you have thought would have happened to this chart?

You simply can't time the market.

I sometimes think - "The market is overvalued I should get out" . But then what happens if it continues to rise? Worse, what happens if it falls? At what stage would I get in again.

We have to keep repeating it - to make money timing the market you have to get two decisions right - you have to know when the top has been hit, and you have to know when the bottom has been hit. Sorry Willy - but I doubt you can do either.

Brendan

 

[galway_blow_in]

most people would consider twenty years to be a long time holding yet anyone who bought the S+P at the end of 1999 ( price was 1425 ) , has only seen gains of about 4% per annum ( not including dividends )

 

[Gordon Gekko]

It's all about valuation. That person who bought in 1999 was investing at one of the worst times in history, and still he/she is in the money. Time in the market...

 

[galway_blow_in]

It's all about valuation. That person who bought in 1999 was investing at one of the worst times in history, and still he/she is in the money. Time in the market...

i know 1999 was towards the end of a bull market which began in 1982 but twenty years is still a very long time in the market , if you bought a house in the year 1999 anywhere in ireland , its worth more today , same in the uk or the usa , if you bought the s + p in 1960 , you were up nearly 100% by 1980 and that is considered a pretty poor period , the 1990 to 2000 period was exceptional in terms of gains but i dont think just because the market has more than trebled since march 2009 , this means a serious correction is overdue , that was a pretty unprecedented period

 

[Sarenco]

The real (inflation adjusted) annualised total return (with dividends reinvested) of the S&P500 from the start of 1999 to the start of this month was ~3.33%. That's actually quite a bit lower than the (real) annualised return of the S&P since its inception.

That's not to suggest that I have the slightest idea what's going to happen to stock prices in the future. I treat all predictions of future corrections or returns with the same degree of scepticism.

When it comes to the future, nobody knows nothin'!