Why We’re NOT Buying Stocks Right Now
It’s times like this that we forget that investing is a long game, made up of cycles.
The cycles move through periods where assets are cheap, and others when they are expensive.
It’s usually at the top of the cycle that most investors invest more, ultimately paying too much. History proves this time and again.
Investing money should be like going shopping.
If you know what the standard price is for something, and you have the time to wait, then it makes sense to buy more when prices are cheaper.
Right now, the market looks heavily overpriced to us.
That’s why we are holding off buying assets at the current expensive prices.
In fact, we think asset markets are poised to fall up to 40%.
A Modest Return Beats a Mammoth Loss
Sometimes it can feel like holding too much cash is not getting you a return.
But sometimes getting a very low return is better than losing money, and lots of it.
It’s easy to forget that it has been over 10 years since the GFC (or the Great Recession as it’s referred to overseas) with markets continually increasing in price.
This bull market has stocks teetering at and around their highest EVER prices.
We are now overdue for the next market correction.
Since the bottom of the GFC we have now had the longest ever bull run for the US market.
For reference, a Bear Market is a fall of 20% or more.
So for the Bull Market to officially end, stocks must fall more than 20%.
Our Prediction: Stocks Could Lose Nearly HALF Their Value
We predict we’ll see more like a 30%-40% fall.
That’s why our portfolios are positioned to the maximum defensive tilt right now.
If markets continue up further then we will capture some of the upside.
When they turn down (not if), then the portfolios are also positioned to minimize the losses and also to have the funds available to take advantage of lower prices to buy assets when they are cheap.
I guarantee that we won’t time the exact top or the exact bottom.
But looking at the numbers, even if we’re only HALF right about the fall we think is imminent…
We’ve positioned ourselves to capture whatever remaining gains there are…then swiftly defend our capital when the market shifts into bear mode.
Make no mistake. The markets could well be in the “irrational exuberance” phase.
This is NOT the time to be going all-in on stocks.
This is the time to preserve capital in readiness for buying back in when prices revert to what we consider good value.