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The Four States of the Market... And Where We Are NowBy
Thursday, February 5, 2015
Where do we stand now?
Is it time to get out of the market? Or get in?
Most people don't know...
Why? Because they have no frame of reference... They don't know how to size up today relative to any other time in the markets.
My good friend Meb Faber came up with a simple solution for you on our latest Inside True Wealth podcast...
Meb talked about the "the four states of the market" when I asked him if he was more of a "value" investor or a "momentum" investor. Here's what he said about value and momentum:
Meb does keep both perspectives...
Right now, Meb sees us in the second best of the four states of the market – expensive but still going up. His big concern is that if the trend switches to going down, then we enter the worst state of the market – expensive and going down. Meb says:
So how do you get out? Meb said:
If you had sold back in 2007 when the stock market fell below the 200-day moving average, you would have gotten out near 1,500 on the stock market – and you would have missed the crash all the way down to 666. Take a look... There's nothing magical about the 200-day average – it's just an objective measure to be able to say the uptrend is over, it's time to get out. Right now, we're still in one of the "good" states of the market – expensive but in an uptrend. So according to Meb, it's not time to worry – yet. But that time may be coming, soon.
Good investing,
Steve
Further Reading:
If you're looking to "batten down the hatches," asset allocation is one of the most important steps you can take to protect your wealth. And Steve's friend Meb just wrote the book on it. Find out what he recommends right here.
Steve isn't worried about the market in 2015. According to him, there's still plenty of room for stocks to run. "Don't let fear or emotions push you out of U.S. stocks," he writes. "You want to own them in 2015." Find out why right here.
Market NotesIF THIS STOCK IS SOARING, ARE THINGS REALLY THAT BAD? Disney just announced record sales last quarter... and that's good for America.
Over the past few years, we've shared dozens of charts showing the soaring bull markets in home-improvement stocks, transportation stocks, and financial stocks. We figure that if these sectors are enjoying rising profits and soaring stock prices, the economy can't be doing all that bad.
Another great sign is the recent business and share-price performance of Disney. Disney is one of America's largest media and entertainment companies. When folks have enough money to spend on cable TV, movies, and vacations, Disney prospers. It is THE iconic brand in American entertainment. Thus, its share price is a solid gauge of what's going on with the economy.
As you can see below, things are going well. Disney shares are in a major uptrend and on Tuesday, the company reported a 19% increase in profits for the first quarter. Shares gained about 8% yesterday on the news... and reached an all-time high. It's yet another sign that "things can't be all that bad" in America.
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