Is Now A Good Time To Be In The U.S. Markets?
By Jim Bauer
@porwest (78759)
United States
April 5, 2021 6:38am CST
I am going to say it this way:
It is always a good time to be in the markets.
But, while I say that with full confidence, and believe it to be 100% true, it is a bit of a generic statement and needs more analysis to understand certain things that happen in the markets that determine how much total exposure one should have in the markets at any given time.
The markets lately have been on fire for anyone who has been paying attention. And they have been on fire for quite some time.
This is definitely a good thing. But it also poses a question at some point.
How long can the markets maintain this upward momentum before things correct, as they almost always do eventually?
Let me be clear, I do not see a bubble forming in the markets, and all economic factors look pretty good to support further upward momentum. But we are also fast arriving into what I call 'dartboard investing.'
That is, you put a few stocks on a dartboard and buy whatever stock your dart lands on.
Right now you could do this and nearly anything you hit with your dart is going to be a winner. And that's not how it is supposed to work. Proper investing requires more than just randomly selecting something to put your money into and expecting it to offer a return.
Again, I said that it is not when you should be in the markets. It is how much exposure you should have to the markets based on where the markets are going.
Right now I am continuing to divest here and there, and making adjustments where I feel it is pertinent to do so. I am pulling out of some sectors and switching certain allocated funds to other sectors. And at the same time I am also keeping more money in cash than I did before.
Right now my current allocations are 60% cash and 40% securities.
I just happen to think that something is going to give here for a variety of reasons, and I want to try to hold onto as much principal as I can while at the same time having a strong opportunity if things do go in the other direction to be able to heavily buy into what then would be a deeply discounted market.
The absolute direction of the markets is always up and higher. But markets do take dips. Overall that is not a bad thing considering the former statement. But having more cash when things do dip provide for bigger and better returns on the way back up.
So, that's my two cents.
Don't get out of the markets. But simply adjust your exposure and be more cognizant of which stocks will have the most value over time. Moreover, leave a little something on the sidelines to reap a better reward overall when the markets ultimately take a breather.
13 people like this
9 responses
@porwest (78759)
• United States
11 Apr 21
There is definitely more upside on the way. Of that I am sure. But I also think we may see a pullback which is why I have been so adamant to convert a lot of securities to cash...just in case.
There is only one thing that I see that could propel the market up like a rocket yet, and that is the enormous amount of cash on the sidelines. People have been stockpiling massive amounts of money during this pandemic, and at some point this cash is going to want to go somewhere. More people prefer spending over saving, and so I think once things really get back to normal people will flood the economy with loads of cash.
Where will it go?
I think MOST of it will go to discretionary spending, and so those are the areas I have my eye on for investing. Things like hospitality and restaurants, automobiles, campers, vacation resorts, and even gambling.
1 person likes this
@moffittjc (118556)
• Gainesville, Florida
6 Apr 21
I just did an adjustment of my mutual fund allocations last week, to try and bring things back in balance to what I had intended when I first started investing. Some sectors have increased more than others, so a quick reallocation of assets fixed that right quick. I tend to not micromanage my investment accounts, but I do take a look at them on at least a monthly basis to make sure I am still comfortable with my allocation percentages.
I'm more heavily invested in stocks than you are, but I also invest very aggressively. My cash allocation right now is only about 12%.
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@moffittjc (118556)
• Gainesville, Florida
15 Apr 21
@porwest You've got a very good point. I think that once a high percentage of the population has been vaccinated, you'll start seeing people eager to get back some sort of level of normalcy again, and start spending. Wise choice to invest in companies that will see a benefit of that discretionary spending.
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@porwest (78759)
• United States
17 Apr 21
@moffittjc Yeah, I mean, at the end of the day people simply do not save. It's just the way things are. So, what's driving the saving right now is simply uncertainty. Once people are confident things are back to normal and that jobs are at least more available (which they are in fact) they'll unleash some of that money eagerly and readily.
All of that spending will drive the markets higher.
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@porwest (78759)
• United States
11 Apr 21
It is definitely a good idea to be vigilant and make adjustments as often as possible. One thing I DO see as at least a POSSIBLE continuing upside here is the enormous amount of cash pent up on the sidelines. People have been stockpiling cash at record levels and even the national savings average is at an all time high.
People tend to prefer to spend than to save, and so I think when things really get back to some level of normalcy, all of this money is going to want to go somewhere. And I'd bet 90% of it is going to go toward discretionary spending, so those are the companies I am most interested in right now.
Restaurants, hotels, car manufacturers, vacation resorts, gambling, and so on and so forth.
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@RebeccasFarm (86823)
• United States
5 Apr 21
Yes it very much is, at least to me.
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@TheHorse (206469)
• Walnut Creek, California
11 Apr 21
Our allocations are similar,even if our political beliefs are not. There has to be a correction at some point. And I want to protect what I've made under Obama, Trump and Biden. Is there a point where I'd go "all in"? I'm not sure.
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@porwest (78759)
• United States
13 Apr 21
All in is always a difficult choice for me. I have been 90% stocks and 10% cash in the past, but never 100%. Always good to keep cash on the sidelines for an emergency.
But yes. An eventual correction is inevitable. Just impossible to know when it is coming, and right now there is enough strong economic data to even support where the markets are and them going higher. One thing that continues to weigh on me is the enormous cash on the sidelines as of now—people have stockpiled a lot of money and eventually it has to go somewhere.
But I am still being very cautious.
@LindaOHio (157150)
• United States
5 Apr 21
When things are going so well you always have to be vigilant and watch for any signs that things are going to take a turn for the worst. I'm glad our retirement funds are in a safe, consistent-yield fund.
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@porwest (78759)
• United States
6 Apr 21
It is definitely a good thing. The question is, what generates the yield? What is that consistent yield fund tied to? If it is tied to the markets it will present a yield eventually according to the markets. If it is tied to something like insurance or reinsurance like many annuities are, it is probably relatively safe from market fluctuations. Likewise, there is less risk to the yield if it is tied to municipal bonds, but if it is tied to corporate bonds it can be affected by market fluctuations as well because those will adjust par coupon rates to market conditions and future value.
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@LindaOHio (157150)
• United States
7 Apr 21
@porwest It's tied to insurance; and the yields have always been higher than the banks would be for decades now.
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@porwest (78759)
• United States
7 Apr 21
@LindaOHio Ah. Then I would call them relatively safe. Good deal.
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@dgobucks226 (34417)
•
10 Apr 21
I've noticed the VIX level has now become extremely low which might signal a correction is on the way. I've put some on the sidelines awaiting for that opportunity to pounce again.
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@dgobucks226 (34417)
•
16 Apr 21
@porwest Yes, good points Jim. I am proceeding with caution and awaiting a pullback. We'll see how far this sugar high continues to go?
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@porwest (78759)
• United States
17 Apr 21
@dgobucks226 Meantime, I have enough in play to ride the wave pretty nicely. So, I am not complaining in the short term.
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@porwest (78759)
• United States
11 Apr 21
Things that I am watching are signs for a bubble, which so far I am not seeing. I am also looking at other underlying economic factors such as consumer confidence, which is surprisingly high, the housing market, which is on fire, and other things.
It seems that even though the markets are going up and up and up there are still some underlying indicators that things are acting the way they should be considering those various economic factors.
But history also points to a situation wherein when everyone wants to be in the markets is usually a sign not everyone SHOULD be in the markets, and so it gives me pause. I have not slowed my conversions to cash.
1 person likes this
@allen0187 (58444)
• Philippines
5 Apr 21
Agree with you that anytime is a good time to invest. Warren Buffet said it, 'Today is the best time to buy a share in the market.'
Pick tech stocks or even pharma ones, stick with blue chip stocks if you are feeling iffy on what to buy. Important thing is to start investing and make your money work for you instead of you working for your money.
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@yukimori (10143)
• United States
6 Apr 21
I keep finding myself wishing I had more cash in my retirement account when things really dip. 
It'd be nice to lower my cost basis on a few positions when that happens.
I have a few hundred in a second Roth IRA allocated to stupid meme stock purchases, but for the most part I'm leaning towards ETFs over individual stocks for the long term. It can be fun watching things like GME go brrrrr to the moon, but that's a gamble not an investment strategy. 
It'd be nice to lower my cost basis on a few positions when that happens.
I have a few hundred in a second Roth IRA allocated to stupid meme stock purchases, but for the most part I'm leaning towards ETFs over individual stocks for the long term. It can be fun watching things like GME go brrrrr to the moon, but that's a gamble not an investment strategy. 
@arunima25 (85546)
• Bangalore, India
5 Apr 21
Investment in market always involve a risk. We invest a little part there. My husband keeps a close watch on that and I am just in learning phase
. We allocate our savings as safe investment (60 %) , low risk investment (30%) and only a little in high risk.
. We allocate our savings as safe investment (60 %) , low risk investment (30%) and only a little in high risk.1 person likes this
