Are You Prepared for the Next Bear Market?

My expectation for losses in U.S. stocks during the next bear market is over 60%, which would take us back about twenty years and would require at least a 150% gain just to get back to even.

What impact would such a loss have on your portfolio? What impact would that have on your ability to retire or sustain your retirement lifestyle? Would any other financial goals be impacted? How about the toll on your mental health to see such a large chunk of your life savings wiped out. Continue reading “Are You Prepared for the Next Bear Market?”

Investing Is So Simple. Just Do This.

Load up on stocks when they’re cheap. Reduce stocks when they’re expensive. It’s really quite simple.

Valuations tell us how expensive or cheap stocks may be, but beware! There are many different measures of valuation so it’s important to focus only on those that are highly correlated to future returns.

Below is a chart showing one measure of market valuations going back to 1900. This particular valuation metric is called the Shiller Price / Earnings Ratio, or “Shiller PE” for short. The Shiller PE has about a 90% correlation with future 10-year returns. That’s a very respectable correlation and indicates reliability.

Notice the peaks and valleys? I was curious to know how the market performed following various extremes over time to see if the Shiller PE provides useful information. So I performed a brief study. Check out the results…



Continue reading “Investing Is So Simple. Just Do This.”

May be a good week or two for stocks. Watch for this, however…

The market officially entered correction territory on Thursday (10%+ decline).

On Friday, the S&P 500 bounced off the 200-day moving average (~$2,539) and then had a huge reversal to the positive to close at about $2,620. This could indicate a continuation of the rally over the next week or two producing positive returns. I’ll be closely monitoring other key levels during this rally such as the 100-day moving average (~$2,640), 50-day moving average ($2,719) and, of course, the prior peak of $2,872 from January 26th. See chart:

Continue reading “May be a good week or two for stocks. Watch for this, however…”