Stock Market

The stock market is way overvalued in my opinion. By almost every metric, this market is sky high. Take a look at the CAPE ratio for example (also known as the Shiller PE ratio) . The S&P ended 2024 at a level of almost 38. Historically speaking, the index average is around 15. The only other time in history it was higher was during the Dot.com era. And we all know what happened then. Black Tuesday before the 1929 crash was 30.

The government dumped an unprecedented amount of liquidity into the economy after Covid, the obvious and immediate results of that was the runaway inflation. Even though the average guy out there has spend his/her "stimie" checks long ago, the M2 money supply is still at historical highs. Look at a chart, it looks like a hockey stick. There has never been this much money sloshing around in the economy and it's thrown everything out whack.

So no telling how things will work out this time around. But in my opinion, we do need a pretty healthy correction before I'm ready to start adding positions to my portfolio. I'm not selling any more, but I have lightened my risk exposure, took some profits and raised my liquid cash position. I'm happy with letting what I still have ride through any pending storm and getting 4%-5% on my cash while I wait for a better entry point to pounce and feather back in.

With that said, it doesn't mean that the market won't continue to go higher over the near term. Bubbles can grow for a long time before they finally pop, or even have a meaningful correction.