When will the current equities bull run end?

There is synchronised GDP growth around the world. Company profits are still growing. I still don't see euphoria in the markets where your taxi driver is giving you tips on hot stocks. Euphoria phase is hard to miss because during that phase everyone believes this time it's different. Nothing can go wrong. I honestly don't see anything like that right now.

So unless something bad happens to derail the synchronised GDP growth around the world or you see euphoria in the markets I do not expect current bull market to end. You may get a 15-20% correction anytime but that is not unusual in a bull market.

Cheers,
Oracle.

 

Berkshires problems are NOT your problems.

My personal feeling is that there is a lot of upside still to go and you are missing out by being in cash (eg if the market goes up for the next 2 years.....even with a crash it might not fall below todays levels....)

Eg my current trailing 12 month return for my 401k Vanguard POGRX is currently 24%.....(this is the bulk of my USA equities exposure though I also hold a TD Ameritrade account for speculative trading......where I'm being killed with over exposure to $INTC lol....executives who cant keep it in their pants -ugh. (it will be fine in the long run though so if I had spare cash I'd actually be buying even more on the dips).

I don't expect the next 12 months to be as good.....but if you've been sitting on cash for the last 12 months you are now 24% behind me......

Hope that makes sense.

 

Yep....but 15%=same price as 12 months ago......
eg sit around and waiting for the crash means same price as today.

I think at the end of the day we can ALL agree equities will be up 10 years from now and worth more than they are today.......

So what we are really fighting is "time" as such.....invest early, invest often.

 

In a similar situation to the OP, except views have changed in recent times from being binary (in/out) to somewhere in the middle.

Australia's CAPE doesn't look so bubbly: | CAPE Ratios by Country 1983 - 2018

Having said that, I think when U.S has its next bear market, Australia would be similar affected.

 

Is anyone following what's happening in Turkey and or there Asian markets? Anyone buying yet?

 

bull run will ends when risk adjust for equity against long term bond no longer there

 

I am taking a very similar approach.

I am still around 20% invested. Balance in cash.

I posted on a separate thread about the opportunities that present themselves during a crash.
Essentially I agree that the US equities markets have gone very hard since GFC. Anyone can look at the chart and see that.

It appears that the US economy is going well and will continue to grow for a while yet. However I am comfortable forgoing any gains on top of the bull market we have had from 09-18 in order to take advantage of the next downturn.
I don't want to gloat on post GFC returns but suffice to say that missing out on another 10-25-50% will matter not in comparison to value investing after a decent crash.
My defining moment came when I noticed more brand new Maseratis driving around Sydney after the GFC. "Make money when there is blood on the streets"

The global economy is so juiced up on leverage, my opinion is that the downturn will almost certainly be of equal if not greater proportions to the GFC. Add to that, that modern markets are made for institutional investors who ride long all the way up and short all the way down. So once it starts it will not stop at 20%. Why we need all these different products/ways to gamble on the stock exchange is a mystery to me, but don't try and fight the game.

Buffet having $100b on the sidelines is not a coincidence. Sure his investment opportunities and style are different but the game plan is the same.
“Be Fearful when others are greedy and greedy when others are fearful.”

This approach garners many knockers;
"You're trying to pick the bottom" No, it is 100% certain I miss the bottom, but I will also miss holding at the top.

"It's all about time in the market, not, timing the market" Biggest load of rubbish I have ever heard. Touted by people trying to sell you something.

"Dollar cost averaging" Sure, in a regular market it works well and I add more funds as they become available. But crashes are not an "if" proposition, they happen all too regularly to be ignored.

"The economy is running hot, you'll miss gains" Said the majority of investors prior to every crash in history.

Potential catalysts;
Who knows, but it will either revolve around debt or Trump or both IMO.

At the end of the day, you have to make a decision.
"Do I think this bull market, which makes the two previous S&P500 peaks look like anthills, will continue indefinitely?"

Log scale chart for reference

 

Re debt;
Turkey obviously looking shaky
Argentina just jacked their rates up by 5% to 45%. That is not a typo.

Dexus CEO talking about how they are prepared for a black swan event, clearly addressing some investor concerns. It is not like a CEO to talk down their stellar results with such things.

Dexus boss warns on' black swan' event derailing rosy office outlook

 

Replying to the linked article.
For sure, this is the common wisdom. Buy well, don't sell during the crashes and keep investing.
And there is absolutely nothing wring with that, it will deliver ~8% (as per the article).

But why not ride the bull wave up, pick an exit point that is (in the case of S&P500 bottom to current) some 389% up (729 - 2839).
Put some cash aside and wait for the next bottom?

And what is the downside?
You miss the peak? But if you hold through the peak you have lost the peak anyway?
So unless you plan to pick and exit at the peak, where is the downside?

Say you had $100k invested pre GFC, let’s look at some scenarios and capital levels

1) cashed out pre peak and bought at the bottom = $389k today

2) But let's say you miss the bottom by say 3 months, entry point is 940ish = $302k today

3) buy and hold. The previous peak was 1556, so if you had say $120k by holding right up to the peak and then riding out the crash = $218k today

Repeat the above in the next cycle with accumulated funds and it looks even better.

Buy around (but not at) the bottom with $300k.
Next peak ~ $900k.

Buy and hold through 2 cycles $389k.

Now, GFC was a particularly large crash and even larger rally, and nothing says this will be repeated, but this effects both those that hold and those that sell and re-enter.

Maybe you exit too early and the bottom is still above your exit. Yep that's a risk, you certainly don't want to bail out too early. But all investing has risks. The above yields are, for me, worth the risk. Particularly in a debt fuelled world like the one we currently find ourselves in.

 

timetoact, have you factored in tax events & transaction costs in the above?

I actually agree that whilst timing the market is hard, we are actually able to get (at least) a rough estimate of where we are in the bigger picture. Ie the current S&P500 bull run - going on a decade now. Surely we are closer to the top than the bottom?

Perhaps hedging, or straight out shorting the market can be discussed as well.

 

No I haven't, fair point.
It would be different for everyone. But let's look at it.

$200k profit with 50% CGT discount = $100k @ top marginal rate = $45k tax.
Left with $255k to invest in the second cycle.
= potential gain to $765k.
Tax on $510k with CGT discount = $114k
Balance of $651

Versus $389k buy and hold.

In my personal situation however, round two would be enough to leave in the market for retirement income so I could deduct the last round of tax.

It's one of those sounds to good to be true scenarios. But especially for property investors where you have the funds in an offset account effectively earning better interest than cash in bank.
Is it too good to be true?

 

This is a question I have pondered over for countless hours. Obviously it would be great to get the answer correct, but without knowing the future, the results could be very bad.

At some point in the next 10 years there's a big chance of a huge downturn. What is huge? 50, 70, 90% When will it come? 1, 3, 5 years?

If I sell now and wait I will forgo up to n years of dividends and growth whilst paying CGT for profits. Then, once the downturn comes how far will my timing be off the bottom? 20, 30, 40%?

If I review these scenarios there's probably a less than 50% chance I will come out on top. Sure, in the best case scenario I may be well ahead, but what is the likelihood I will pick the bottom at 90% that starts with a downturn from the day after I sell?

The strategy I have settled on is not selling but DCAing available funds into the market once everyone has completely shat themselves. I am relying heavily on holding my nerve but I've thought about it enough that I know the trigger points and will be buying from an algorithm. Only one person gets to absolute bottom, but I hope to buy enough at a decent discount to lower the total cost of my entire portfolio such that dividends will be sufficient for FI. that may be some time after the market picks up.

It may not be the best strategy but it is the best I've got right now.

 

Curtesy of Jason Zweig, "during the peak of the bull market, many investors bragged that they have a high tolerance for risk. Thanks to a streak of glorious gains in the late 90's, these investors amygdalas had never been ignited by a major fiancial loss. That led all many people to the mistaken conclusion that big losses wouldn't bother them. But big financial losses are always painful to anyone with a normal brain, because our mental circuits respond so powerfully to any vivid danger. Imagining that you can shrug off setbacks before you've ever suffered any is a disastrous illusion, since it leads you into taking such risks that huge losses become inevitable".

I have been on a journey of behavioural finance and psychology of late, anyone can pick stocks or lics or etfs but what about the emotional intelligence and between the ears stuff??? I think this is hugely if not the most important thing in long term investing!

 

That is when I think focusing on the dividends would help. I bought my managed fund in Aug 2007, then saw the balance went down to around 50%. I did not sell simply because I did not want to realise the loss, plus I did not need the fund. The distributions were enough or slightly more than enough to cover interest. I sold out in 2012-13 because I realised that the fee was high.

I switched my super a few times to the more conservative options after the ASX reached 5300-5400 which I thought was high. In hindsight, should have sticked with the same allocation. Not smart enough to time the market.

 

Love it. I too don't believe I'm smart enough to pick the bottom or top. It's all about getting in with a decent margin of safety and hold for the long time for me.

One's risk-free return should also be taken into consideration. Someone with a PPOR loan and an offset has a risk-free return of 3.5-4%. That person would need more enticing prospective returns to become invested than someone who's got cash in a high interest savings account collecting 3% before tax...

 

Yellow line is S&P 500 price index rebased to 100 for period 1975 – 2000.
Red line is S&P 500 price index rebased to 100 for period starting 2009.



Chart says nothing about what will happen in the future – just puts post 2009 market in perspective of previous secular bull market. Not forgetting USA now has a higher retention ratio, which bolsters current price index.

Consensus for a while now has been that US market is overextended. Market just keeps poking its tongue out at consensus.

When will the current equities bull run end? No Idea. Deal with it. Trying to answer unknowable questions is not conducive to good investing.

 

I can’t help but think the following...for most of us, the smarter we think we’re being, the less likely it is to be true.

 

Thw fatal problem is not realising how stupid we are and making strategies as if we're smart.

"Bitcoin can't go down, they need a currency to replace the USD"
"Its a lot of money but I know I can sell this Tulip for more"
"I'm going to walk on this red light because I know a car isn't speeding around the corner"

 

So true. When I first started educating myself about equities back in 2015 the prevailing "expert" opinion was the same as it is today - that markets were overstretched and the bull market had gone on for too long.

I had a binary view on things. (eg: "should I be in or out?"). The opportunity cost of that mistake is probably ~20% missed returns. What I should have asked myself was "based on the facts, how invested am I prepared to be?" The difference is nuanced but the answer would most likely be neither 0% nor 100%.

Fast forward to today. The bull market has continued for another 3yrs. By the end of the month, U.S would of had its longest ever bull run. The same reasons that justified the decision back in 2015 are even more compelling.

Given Australia's valuation relative to the U.S and my personal risk tolerance, I'm probably comfortable to be about 50% invested. Am I though? Nope. Probably 20%.

Risk aversion is real. Gotta address that before the true bear hits, else the same behavioural deficiencies will surely prevent taking action when there really is blood on the streets.

 

Fully agree @Befuddled for me it is not about saying I am all out or all in on US, but rather, I have a wide variety of investment options available to me, so what markets represent good value and the best margin of safety so I can add some holdings.

When I look at adding more S&P 500 I think there are better options right now