A simple way to think about stock markets...and returns in that mode back to 1920s in US.
Green Light: cheap, in an uptrend , 17%
Yellow Light: expensive, in an uptrend, 9% (now)
Red Light: expensive, in a down trend, 3%
trend 10-month SMA
valuation CAPE ratio at the time
Green Light: cheap, in an uptrend , 17%
Yellow Light: expensive, in an uptrend, 9% (now)
Red Light: expensive, in a down trend, 3%
trend 10-month SMA
valuation CAPE ratio at the time
This exercise really illustrates two insights...
1. The trend is your friend.
2. Using only value is dangerous as you can still make money in expensive markets and bubbles. But you need to have a parachute exit for when the signal changes...
1. The trend is your friend.
2. Using only value is dangerous as you can still make money in expensive markets and bubbles. But you need to have a parachute exit for when the signal changes...
So obviously the US is in Yellow Light mode (was darn close to Red Light recently and QQQs are there)....but there are some markets that are in Green Light mode, or as my friend Sjugg describes...
Cheap, hated, and in an uptrend!
Cheap, hated, and in an uptrend!
UK stocks are a good example. Basically gone nowhere for 15 years, and bottomed at a CAPE last year in low teens....and hated!
indices.barclays/IM/21/en/indic…
indices.barclays/IM/21/en/indic…
What's your favorite country cheap, hated, and in an uptrend?
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