The stock market is a dangerous place to be, regardless of what the sell-side touts say.
CNBC is noted for their optimism as are many analysts. Many of these people are “selling their book” in the sense that they make money by convincing investors to trade or to invest in their funds. A mutual fund that requires being fully invested in stocks will never tell you to get out of stocks. That would be equivalent to telling their customers to go somewhere else.
Everyone has an opinion regarding stocks. Mine is that I don’t want anything to do with them. Others believe they must stay in the stock market because it has dropped and this is the wrong time to abandon ship. Still others have cut back their percentage of wealth committed to the stock market.
Unfortunately, there are few alternatives thanks to the Federal Reserve. By driving interest rates to virtually zero, the Fed has forced people further out the risk spectrum in order to get returns. Retirees should not have to gamble at this stage of life in order to obtain reasonable returns. But, courtesy of deliberate actions by the Fed, millions are forced into this position.
Individuals, in my opinion, should be wary of stocks. That doesn’t mean they should abandon the stock market completely. Just be especially cautious, whatever your investment objectives. That goes for gold and other alternative investments. We live in dangerous times and literally face uncharted waters. History, while sometimes a reasonable guide, is less likely to be as good a guide in such times.
For what it is worth, using selective data a case can be made for the market being undervalued or overvalued. The Economist provides an interesting, and short, blog on valuations which concludes that stocks are likely overvalued. This type of analysis is not what you get from the typical broker or CNBC talking heads.
Whether their analysis is correct or not is up to you to decide. It is a viewpoint many have never been exposed to. Perhaps it is worthwhile to see this other view.
