Since December 2021 I've positioned bearishly in the market. Selling all of my stocks and going 100% cash. I've recently begun buying back into the markets … slowly and with caution. I was originally bearish because PE ratios were simply too high, and inflation was high, which if you look at history triggers interest rate hikes, which triggers downward pressure on the markets. Now, the tightening is seemingly priced in and the average PE ratio is around 21 in the SP500 (in December it was around 25). This PE ratio is closer to the 10-year median of about 20 which is why I've begun my DCAing into the falling market. Before, I was bearish because the market was simply too hot, but now, in order to be bearish one must believe there is fundamental problems with our economy that will result in substantial GDP decline. There are still many risks including war, inflation, effects of interest rate hikes, and demand decline in certain sectors after exceptional performance during the pandemic (we saw this with Amazon).
The point I'm trying to make is that the market is no longer overvalued from a cashflow perspective, but there are still headwinds that we must hurdle. If you are bearish, you are now betting against the American economy to some degree which may hold some merit after all.
I want to caution that I am by no means bullish, nor bearish, but rather neutral on this market right now which is why I'm unloading my cash position slowly.
Today I bought $AMD, $U, $GOOG and $INTC. What have you had your eyes on?
Leave a Reply