The last couple of years have been very challenging for investors seeking value, and it has required no little patience to sit on a high allocation to cash.
US stocks are down about 20% in less than three weeks, which has afforded a few buying opportunities – including in oil stocks – for those sitting on plenty of cash.
The US S&P 500 had fallen from about 3,400 last month to 2,734 at today’s lows, but still the CAPE ratio was only down from 33.3 to 26.1, indicating that the market is still historically expensive.
Yes, despite all the crash headlines, markets remain expensive at this stage.
While the wider market remains expensive, one sector which gradually looks set to offer at least some value is energy.
Crude is now pricing for a US recession, while an oil price war has seen some energy prices have moved towards the point where it might be time to put out the bucket rather than a thimble.
Elsewhere, the market remains expensive and caution is warranted.
I’ve noticed a few younger investors questioning whether such high intraday volatility is normal.
The below chart shows the times when US stocks have experienced a gain of 5% or more in a day.
Which is to say, during the tech wreck and the global financial crisis.
During stock market meltdowns, it’s common to see the market ‘pop’ higher at various points, leading ‘permabulls’ and market optimists to declare that the worst must surely be over.
We can also experience numerous face-burning rallies (a little like what we saw in the last hour of trade last week!).
Despite what we were taught in business and accounting school, volatility isn’t the same thing as risk.
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