S&P500 at record highs - time to stay in or pull out?
Discussion
A question for you all, and the caveat is I fully understand no one can predict the future:
My SIPP pension plan is invested in a low fee S&P500 tracker, I have a few family ISAs also tracking the S&P500 and all have done unsurprisingly well. As the S&P 500 is now at record highs, I'm hearing Warren's saying in my head “to be fearful when others are greedy and to be greedy only when others are fearful".
My thinking is: Russia only has to launch a missile on the wrong side of a NATO border, the middle east is pretty hairy at the moment (ok - maybe not much changed there but it's not looking great atm), The global economy looks to be settling into this period of nominal interest rates 4-6%, insolvencies are rising in western countries, the picture looks quite challenging at the moment and we may go through a difficult period before a recovery takes place.
But investor confidence seems to be high? When considering the risk free rate is now quite attractive, I'm a little puzzled as to why?
Cards on the table: I missed the global financial crisis market as I was in my 20s and had no investments to speak of. Covid - opportunity passed me over, I think we could all see that the situation was going to spread to our shores and wreak havoc, to the degree that it did I'm not sure anyone could have predicted, but I stayed in throughout the period and saw the fall and rise of my SIPP as we went through 2020-2022.
So, I'm sitting here now thinking: do I be proactive and sell everything to cash, and just sit tight until things stabalise a bit more? I'm thinking worst case the markets keep moving upwards and I may lose out 5-10% return by holding cash for a year (not taking inflation into account). But if things plummet then the gains to going back in at a much lower level could work out well long term.
Again, I'm not asking anyone to predict the future. Maybe share what you are doing, and what your thoughts are on the current market? Could be a strategy is to hold a proportion in cash, and a proportion in a fund or funds, what are you doing and do you have any good mitigation strategies?
My SIPP pension plan is invested in a low fee S&P500 tracker, I have a few family ISAs also tracking the S&P500 and all have done unsurprisingly well. As the S&P 500 is now at record highs, I'm hearing Warren's saying in my head “to be fearful when others are greedy and to be greedy only when others are fearful".
My thinking is: Russia only has to launch a missile on the wrong side of a NATO border, the middle east is pretty hairy at the moment (ok - maybe not much changed there but it's not looking great atm), The global economy looks to be settling into this period of nominal interest rates 4-6%, insolvencies are rising in western countries, the picture looks quite challenging at the moment and we may go through a difficult period before a recovery takes place.
But investor confidence seems to be high? When considering the risk free rate is now quite attractive, I'm a little puzzled as to why?
Cards on the table: I missed the global financial crisis market as I was in my 20s and had no investments to speak of. Covid - opportunity passed me over, I think we could all see that the situation was going to spread to our shores and wreak havoc, to the degree that it did I'm not sure anyone could have predicted, but I stayed in throughout the period and saw the fall and rise of my SIPP as we went through 2020-2022.
So, I'm sitting here now thinking: do I be proactive and sell everything to cash, and just sit tight until things stabalise a bit more? I'm thinking worst case the markets keep moving upwards and I may lose out 5-10% return by holding cash for a year (not taking inflation into account). But if things plummet then the gains to going back in at a much lower level could work out well long term.
Again, I'm not asking anyone to predict the future. Maybe share what you are doing, and what your thoughts are on the current market? Could be a strategy is to hold a proportion in cash, and a proportion in a fund or funds, what are you doing and do you have any good mitigation strategies?
Jonathan27 said:
Not advise, simply sharing my plan. I'll just stick with it. It may go down for now, who knows. But I don't plan to use the money in the near term so any losses are academic as to a degree are any gains. Long term investment mean sticking with the plan through goo and bad times. Also the S&P 500 has been a record highs loads of time, by definition it hits new highs quite regularly over the long term.
In short, ask your self when do you expect to need / want the money out of the market. If it's years away I'd stick with it. If its in the short term I would sell and take pleasure in the gains.
Fair enough, I'm not going to draw on my pension for at least 15-20 years, so the money isn't needed now. It's more along the lines of seeing the market at a potential peak, some geo-political instability, and a risk it all could lead to a crash. And being frank - taking a step to sell high / buy low if that is what transpires. I have a fantasy of possibly being able to add 50%+ value to my pension if things to go to pot (GFC / Covid - examples of where you could have achieved that and more).In short, ask your self when do you expect to need / want the money out of the market. If it's years away I'd stick with it. If its in the short term I would sell and take pleasure in the gains.
I get the long term investing plan, but if you have an inkling, a voice in your head telling you that things could take a turn here, then pulling out temporarily and then going back in at a large reduction on todays value would be a strategy to explore I'm thinking.
Colonel Cupcake said:
I would just hold. If there is a crash, then you will get more for your money if you are still buying and they will return to current levels or better soon enough.
Cool, yes I'm still contributing through my employer pension plan so no worries of that stopping any time soon. thanks for your thoughts fat80b said:
Same for me. - I'm 10 years away (minimum) from spending it, so it doesn't really matter what happens in the next few years. The bet really is "Do you believe that the US economy will be bigger and better in 10 years' time than it is today?" - Answer = probably still yes.....
And remember that back testing shows that continuing to drip in through good times and bad performs just as well as saving through the ups and downs and picking bottoms to invest in. Warren would also say that DCA is the best approach to take.
If anything, I choose to see it such that a drop in price this year would actually enable me to buy in at a better (i.e. cheaper) price....(i.e. while a high price feels good, it is actually bad, and while a drop feels bad, it's actually good.....)
Understood, and yes I'm all in for betting on America, hence why all my main investments solely track the S&P500 (plus the low fees of the funds).And remember that back testing shows that continuing to drip in through good times and bad performs just as well as saving through the ups and downs and picking bottoms to invest in. Warren would also say that DCA is the best approach to take.
If anything, I choose to see it such that a drop in price this year would actually enable me to buy in at a better (i.e. cheaper) price....(i.e. while a high price feels good, it is actually bad, and while a drop feels bad, it's actually good.....)
I agree the continued investment model is the right way to go, and my pension is continuing to achieve just that, DCA investing.
so your last point is really where I'm thinking - I have no cash to buy in at a better rate as all my investments are tied up in S&P500 trackers. So this is what is driving my thoughts to sell some/all and then have the option of buying back in, whilst getting some sort of interest on holding cash (not sure how much atm, maybe 2-3%). If I sit and do nothing, then if it crashes I have no instrument to buy back in and benefit, that's really what I'm considering.
Some interesting thoughts here also:
https://www.forbes.com/advisor/investing/stock-mar...
"Wall Street is currently anticipating double-digit S&P 500 earnings growth in 2024 and 2025, and the market could experience a significant correction if companies fall short of those expectations."
https://www.forbes.com/advisor/investing/stock-mar...
"Wall Street is currently anticipating double-digit S&P 500 earnings growth in 2024 and 2025, and the market could experience a significant correction if companies fall short of those expectations."
fat80b said:
Sure - with the benefit of hindsight, that seems easy, but can you honestly say you would have re-entered the market last year when *everyone* was predicting a recession and literally nobody was predicting a 23% gain... unlikely imho. Much more likely to have stayed out and missed the rise.
Investing is about discipline...... and thinking you can "beat the market" because you have a "voice in your head" is not really that sensible if you think about it. The only thing we know is that we don't know what is going to happen next.
All very true, and I have never predicted a peak or bottom! I think if I sold at 4900, and the market dropped below 4000 I would be comfortable buying back in between 3500-4000, then go back to holding long terms and continue with the standard pension plan contributions I have. This is just a purely hypothetical example and yes it's very easy to say that and not live through a live example. Again - the most recent example was Covid - we all saw things happening in real time in Dec 2019 / Jan 2020, when the virus entered our shores, numbers started rising, whilst we couldn't expect what happened in it's entirety, we could see things could get bad. I just kick myself for not reacting, even if I sold half to cash that would have done me well. Are we in a similar time but with different levers pulling the markets around? This is the question.Investing is about discipline...... and thinking you can "beat the market" because you have a "voice in your head" is not really that sensible if you think about it. The only thing we know is that we don't know what is going to happen next.
The voice in my head is really the combination of geo-political instability, economic news, and sentiments from "experts" on the tech companies in the US being somewhat overvalued, so it's not just a wild whim, although there are obviously no guarantees here and it's all about risk/reward as always, I'm tipping more towards now being risky staying in, but your view / comments and experience are all helping me with my general observations and thoughts. So many thanks for your view.
asfault said:
15th jan 2021 3760 record high for s&p 500 what would you do if the question ws asked back then?
Yeah I'm trying to think back, obviously early 2020 was a bloodbath and I'm thinking by Jan 2020 I could have reacted to what was happening generally in the world towards covid and pulled out some equities to cash. By Jan 2021, things had recovered, restrictions on travel and holidays had relaxed to some destinations, the airlines were really hurting. If I had sold during Jan 2020 before the main crash - so sold at around 3300, I think I would have gone back in during April when the market was recovering, so lets call it 2600. I wouldn't have predicted the peak or bottom, but following the general trend of the recovery that would have given me a roughly 22% discount on my portfolio. The real longer term benefit from that would be at current values my portfolio would be double the value nearly now, instead of 48% higher now compared to the 3300 level in Jan 2020. This is all hypothetical and best guess of how I would have reacted. There is no way I could have known peak/bottom as I said, but Jan 2020 we could see the signs of a pandemic coming, can we compare that to now with the points I've made above about world events/overvaluations?
So to answer your question, I would have already made my move before Jan 2021, and as we were still in a recovery and the world wasn't in the tough spot it is now - I wouldn't have the same view on things that I have now. BOE interest rates in Jan 2021 were 0.1%, Russia hadn't invaded Ukraine, the middle east was "calmer" there are a lot of differences from then to now.
But good to think about that period also and why pulling out wouldn't have made sense
clubsport said:
Interesting timing.......
The consensus will undoubtably be to; hold as time in the market is more important than timing the market!?
May as well end the thread there?
Friday was a very interesting day for the S&P 500, it closed up 52 points on the day...nice!
There are quite a few commentators and analysts out there pointing out that although the SPX closed up on the day, within 1% of the all time high print the SPW (equal weighted S&P of the same names) retreated. On Friday 51 more stocks of the 500 fell than gained.
There are apparently a handful of occasions since the SPW came into being (1990) when this has occurred, the market did continue higher before a correction came about.
There is another financial analyst at one of the US banks drawing a parallel with financial events of Q4 1987....?
Admittedly it is a small sample size, but it does show financial markets are not exactly in equilibrium, right now?
I tend to have a core position and adjust around that as and when I see opportunities, or more to the point consider my holdings when things don't make sense to me?
I had a good run up from October last year and have taken stock, in part, for now?
Interesting timing indeed!The consensus will undoubtably be to; hold as time in the market is more important than timing the market!?
May as well end the thread there?
Friday was a very interesting day for the S&P 500, it closed up 52 points on the day...nice!
There are quite a few commentators and analysts out there pointing out that although the SPX closed up on the day, within 1% of the all time high print the SPW (equal weighted S&P of the same names) retreated. On Friday 51 more stocks of the 500 fell than gained.
There are apparently a handful of occasions since the SPW came into being (1990) when this has occurred, the market did continue higher before a correction came about.
There is another financial analyst at one of the US banks drawing a parallel with financial events of Q4 1987....?
Admittedly it is a small sample size, but it does show financial markets are not exactly in equilibrium, right now?
I tend to have a core position and adjust around that as and when I see opportunities, or more to the point consider my holdings when things don't make sense to me?
I had a good run up from October last year and have taken stock, in part, for now?
Time in the market rather than timing the market, I'm all for that long term. Just my short term radar is picking up some enemy bogey activity possibly coming our way.
Some interesting facts there on friday - thanks for that. Very interesting point on the SPW - I've had a look at that now, thanks. I will have a look at Q4 1987.....
So on your last points, are you saying you have made any moves since oct? or just stayed in?
clubsport said:
Don't pay any attention to my trading, it's in the past!
I added to a core S&P position last October as data & fed expectation by the market were encouraging to take advantage of year end rally.
So far, In 2024 we have made all time highs on S&P with curious technical events playing out?
I have since learnt that S&P has never made an all time high with bonds selling off as they did on that day, so that is apparently a one off?
That doesn't make much sense, but the markets are like the sea, they flow and all I look for is a wave to ride rather than be a Canute!
I am still invested in the S&P, but less so right now, I do look to re invest at some point.......in the not too distant future, I appreciate interest rates are "actually" coming down this year, so hardly bearish!
In your position of not needing the money for 15 years, you may as well stay in.
I have too many years experience across various asset classes to just ignore financial market price action, that does NOT mean I am right at all, but I learn something new in the markets most days, which you don't need to consider if you are a long term invester looking at an annual pension statement.
Good luck!
all understood and thanks for your thoughts, all useful!I added to a core S&P position last October as data & fed expectation by the market were encouraging to take advantage of year end rally.
So far, In 2024 we have made all time highs on S&P with curious technical events playing out?
I have since learnt that S&P has never made an all time high with bonds selling off as they did on that day, so that is apparently a one off?
That doesn't make much sense, but the markets are like the sea, they flow and all I look for is a wave to ride rather than be a Canute!
I am still invested in the S&P, but less so right now, I do look to re invest at some point.......in the not too distant future, I appreciate interest rates are "actually" coming down this year, so hardly bearish!
In your position of not needing the money for 15 years, you may as well stay in.
I have too many years experience across various asset classes to just ignore financial market price action, that does NOT mean I am right at all, but I learn something new in the markets most days, which you don't need to consider if you are a long term invester looking at an annual pension statement.
Good luck!
dingg said:
Sell everything to cash, watch the market increase by 33% whilst your cash is eroded by inflation, decide enough is enough, lump it all back in and watch the market plummet by 20%
That's the way it works lol
LOL - I totally get this, I have done similar on a few equities in my time................That's the way it works lol
All fun and games.......
gerlewis said:
The S&P has spent over 30% of its life at or near an all time high.
If you sell now, when do you get back in?
What if it is never as low again as it is today?
It would be advisable to have actionable answers to these questions if you are going to make a play. Otherwise it would be gambling based on hunches, and that doesn't usually end well.
My play is leave it in the market, especially as interest rates start to drop. The wealthy will be looking to move out of high interest savings accounts into other assets which potentially yield greater returns, like stocks.
Just my 2 cents, and most likely wrong
Good point on the 30% at or near highs.If you sell now, when do you get back in?
What if it is never as low again as it is today?
It would be advisable to have actionable answers to these questions if you are going to make a play. Otherwise it would be gambling based on hunches, and that doesn't usually end well.
My play is leave it in the market, especially as interest rates start to drop. The wealthy will be looking to move out of high interest savings accounts into other assets which potentially yield greater returns, like stocks.
Just my 2 cents, and most likely wrong
If I sold now I would probably wait out the current geo political situations, and see what happens by Q3 2024 in the general economy (with focus on US), see the earnings results during the year and then see how it goes. I get your point though - if a crash isn't forthcoming then when do I go back in? maybe have a strategy that if the market rises another 10% I would go back in - that confirms the sell low buy high strategy mentioned above and won't help! But it all depends on what happens, could be a good play, could be a bad play, it's a risk either way.
I have thought about when interest rates drop, investors would generally favor other investments outside of risk free rate if the rate plummets, but do we expect <1% interest rates as a go forward position? Are those days numbered? If medium to long term 3% is what we expect, then cash/bonds are still attractive for a portion of a sophisticated (or institutional) investors portfolio, short and long term.
Things just aren't making much sense at the moment, with higher interest rates and instability the equity market shouldn't be at all time highs? We should be in a bear market and we aren't - this is what's driving part of my thoughts!
I'm leaning towards maybe hedging a taking a proportion out to cash, could even invest in a completely different kind of fund (property?). Gold also at all time high is another thing to consider, do we see that breaching 2.5k oz should things go to pot?
clubsport said:
S1MMA,
As expected the general consensus was always going to be stay in and invested. PH is predominantly a car forum after all!
That slightly ignores the question you originally asked?
It does make you wonder if everyone is so convinced the S&P is a one way street to positive returns, why they are not invested to their maximum exposure or borrowing from their mortgage to see a repeat of the 24% gains seen in 2023?
This is a fair comment, and something I also state to friends (especially those in crypto) who feel like they can predict the future. Why haven't you sold your house if BTC will be 100k by year end and gone all in? As expected the general consensus was always going to be stay in and invested. PH is predominantly a car forum after all!
That slightly ignores the question you originally asked?
It does make you wonder if everyone is so convinced the S&P is a one way street to positive returns, why they are not invested to their maximum exposure or borrowing from their mortgage to see a repeat of the 24% gains seen in 2023?
I think the reality is that hype and positive sentiment help people make investments generally, if we all were pessimistic would we invest at all? Tough one...
I do agree though that long term it's best to stay in and the DCA investment method is something I support.
skilly1 said:
Been following this guy for a while. His outlook is not good.
https://www.tramlinetraders.com/the-french-are-rev...
very interesting, thanks for thathttps://www.tramlinetraders.com/the-french-are-rev...
BobToc said:
The flipside is that if you sold at 4,900 and the index rose, at what level would you buy back in? 5,200? 5,500? 6,000? My best guess is that you’d find it very mental challenging to back in at a number above what you sold at.
Yes, as mentioned above I need to nail down a plan which goes both ways, when do I buy back in if the market goes either way? I'm leaning towards a split plan i.e. not 100% in or out but something that hedges both ways.okgo said:
You’ve got a Ferrari F40 that you paid £1m for apparently but you don’t have any money elsewhere to capitalise on a big dip if that should happen? Right.
My personal take is that it’s pointless, especially as you’re probably in your mid 30’s and if the cars in your profile are real you’re likely doing something right elsewhere that should take precedence over trying to become a trader. You hear of the people that try and flog their house and rent and then buy back in for less - it almost never works out for a multitude of reasons (mostly in the mind I’m sure).
I haven’t been quite as bold as you in that I tend to be a bit more diversified than just NAMER but I shan’t be worrying about anything for at least a decade (same age as you I expect). And as b
hstewie says, as times goes on there is significant modulation available to de-risk/diversify rather than go extreme and move to full cash.
lol, good spot on the F40, I haven't updated my garage on here for 5 years due to lack of activity. The F40 was a fantasy car stuck on here a long time ago for an offline joke with friends, we have a whatsapp group titled "F40 Investment club". You are right - if I was that successful I wouldn't be bothered about 6 fig pensions!My personal take is that it’s pointless, especially as you’re probably in your mid 30’s and if the cars in your profile are real you’re likely doing something right elsewhere that should take precedence over trying to become a trader. You hear of the people that try and flog their house and rent and then buy back in for less - it almost never works out for a multitude of reasons (mostly in the mind I’m sure).
I haven’t been quite as bold as you in that I tend to be a bit more diversified than just NAMER but I shan’t be worrying about anything for at least a decade (same age as you I expect). And as b
hstewie says, as times goes on there is significant modulation available to de-risk/diversify rather than go extreme and move to full cash. I'm early 40s, done alright at work (city for 20 years), and I get your point about sitting tight. It's just if there are some signs pointing to a bear market why not click a few buttons to make a move? I get the "selling your house" thing - but this doesn't really compare right, all you are doing is moving numbers around on a screen. No tax implications / stamp duty / cap gains etc.
More to think about for me really, but good to get the diversity of views.
deggles said:
Good thread.
OP you seem to be alluding to some sort of imminent Black Swan event. As you say, no one can predict the future. By definition these events are rare and unpredictable. We know they happen (dotcom crash, GFC, Covid in recent memory) and will again, we just don't know exactly when.
Surely to invest in equities you have to believe that in the long term, markets will continue to rise? Of course even this is not always true (see Japan!) but if you don't accept that small risk then equities aren't really where you should be. I would add that you can also mitigate that risk through diversification (e.g. global rather than specifically US markets)
Correct, I'm just looking at a basket of variables and thinking if one of them goes pop then what does that mean for the S&P 500, it's quite specific. As above the upcoming US elections will also play a pivotal role here.OP you seem to be alluding to some sort of imminent Black Swan event. As you say, no one can predict the future. By definition these events are rare and unpredictable. We know they happen (dotcom crash, GFC, Covid in recent memory) and will again, we just don't know exactly when.
Surely to invest in equities you have to believe that in the long term, markets will continue to rise? Of course even this is not always true (see Japan!) but if you don't accept that small risk then equities aren't really where you should be. I would add that you can also mitigate that risk through diversification (e.g. global rather than specifically US markets)
I do look at equities as a long term plan (we are talking about my pension here, which has a good 20 years left to run before being drawn most likely). It's just the previous events had some warning signs before the drops, are we in that place now is my musing?
The diversification point is really what I'm thinking now, to hold US equities, cash and maybe something else yet to be decided
EddieSteadyGo said:
You're right that previous big downturns don't just happen out of the blue; instead there is a bubbling up period, where the alarm bells are starting to ring. A good leading indicator of this is when US institutions start buying larger than normal quantities of SPX 'put' contracts, which becomes evident as put prices rise sharply. However, we aren't in a period like that at the moment.
thanks, something else new for me to look at! My background is not in trading or banking from a work perspective, so good to understand these indicatorsokgo said:
So do you really think you’re equipped to do what you’re suggesting better than the people that do this for a living?
You are basically suggesting you are going to perform an action that will result in huge gains, if it was so easy why wouldn’t everyone be on this?
I'm sensing some hostility here from you mate, just take a breather and chill. I'm asking the question to get the insight of people with experience and professional expertise on this, if I wanted to put my head down and do something with no guidance I wouldn't ask the question would I.You are basically suggesting you are going to perform an action that will result in huge gains, if it was so easy why wouldn’t everyone be on this?
There are a mix of views above, all useful to take into account and learn from. Whilst I'm not a trader by background I have a high level educational background in Economics/Finance and 2 dissertations on stock market/pricing volatility so I wouldn't say I'm the average punter feeling around in the dark, whilst that was 20 years ago I have worked for BRK and other financial institutions, so I have a half decent general understanding of the market. I don't know the minutia detail which is great to gain from the experience of posters above.
If your strategy is to hold and forget then great, say that and that's all good. I'm not diversified at all, so looking to change that, and I have said many times no one can predict the future, just react to signs and indicators that a corner may be turned, if they want to risk it!
okgo said:
No hostility, perhaps just a more pointed question - working for BRK surprises me given his mantra. I’d imagine you are closer to the action than 99% of this thread but what you’re suggesting is a bit like asking if anyone has tomorrow lottery numbers.
Good luck with it, amusingly I did exactly what you’re suggesting on one of my fun accounts in Plum just as Covid began gathering steam. Bought back in almost perfectly at the bottom and made something like 50% gain in a few months. It was total luck.
For BRK I was on the side providing the "float" rather than deciding what to do with it, hence my specialisation not being on the equities/investment side.Good luck with it, amusingly I did exactly what you’re suggesting on one of my fun accounts in Plum just as Covid began gathering steam. Bought back in almost perfectly at the bottom and made something like 50% gain in a few months. It was total luck.
Investing in equities is all about risk as you know, you should be able to have better luck with an informed strategy but even the best of us (inc Warren with the purchase of the airlines pre covid as a more recent example), don't always get it right. Funnily enough BRK mantra isn't actually about diversification, if they like something then they go all in on it. On the insurance side Ajit Jain is regularly quoted as saying it's better to take a bigger share of a single risk you like, rather than a small share of 10 risks which are more "average" in performance or expectation. So they do not advice diversification as a rule, which is at odds with most other major players.
So whilst you are mentioning a strategy akin to playing the lottery, you have done the same yourself during covid and done well out of it. That's really my point here, could there be an opportunity to take advantage of a imminent crash. Again I know the answer is no one knows, but having a strategy to potentially take advantage of it may be worth considering.
Gassing Station | Finance | Top of Page | What's New | My Stuff