The U.S. stock market is in a bubble. Why? Then have a look at this:
– Market sentiment and valuations are at extremes.
– Optimism has never been higher. Almost 90% respondents to a recent Goldman Sachs survey said they expect stocks to rise this year.
– Initial public offerings (IPOs) are surging.
– Tesla is up tenfold since its low point in March last year.
– U.S. stocks have rarely been this expensive.
– The Buffett Indicator (the ratio of total U.S. stock market valuation to GDP) is currently 82%.
– Robert Shiller’s CAPE ratio stands at a whopping 34.26.
– The percentage of U.S. stocks trading above their 200-day moving averages is at a 10-year high.
– More than 90% of stocks in most sectors are trading above their 200-day moving averages.
As there is little to expect from the stock market at these valuations, what shall we do? Sell all and go into cash?
Remember, I always said it is impossible to time the market and you are much better of to follow this strategy:
Add to the long-term “Hold Forever” and Perpetual Dividend Raiser Portfolio
– Use periodic sharp market drops to add to these positions strategically.
– Identify those times using the CNN Fear & Greed Index.
– Once the index drops below 20 start adding to your “hold forever” stocks.
– Be patient. Such buying opportunities appear once or twice a year.