The great recession of 2016 has begun.
This is China finally having their 2008 and it impacting the world.
This is China finally having their 2008 and it impacting the world.
Lastly the US CAPE ratio is pretty bad too.
Technicals = Star Signs in most cases.
The fact that people know this information, changes the outcome which is why markets are so hard to predict.
The fact is if you followed the indicators that I mentioned since 1950, your net worth growth rate would've increased at least 50% without even using leverage. Trends in the general stock market change slowly (the price doesn't look like random noise) and that's why it's predictable enough to beat a buy and hold strategy.
I'm long on the US stock market because if US companies are good at one thing, it's their 5% YoY growth.
Well that's easy, the hard part is finding the indicators that will do that for the next 60 years, not the previous!
It's not a perfect strategy by any means. But I think using indicators is superior to a buy and hold strategy. When you invest you are necessarily choosing between different strategies. There is nothing magical about buy and hold other than that it's simple, and a lot of people do it. Historical data shows that if you trade based on indicators then your returns are much higher. I think it's important to find what works the best through calibration and back-testing.
There are also risks such as survivorship bias that even applies to indicators, in addition to companies and economies. The best indicators survive in whatever system you use, and that doesn't guarantee they will actually work well in the future. Still I think it's better than the buy and hold strategy.
I can't guarantee the indicators will work in the future, but they worked in the past, and they make sense to me because the S&P 500 historically followed a momentum-like path. And I don't see why a 65 year trend based on mathematically simple technical indicators will suddenly change overnight just because it's the future versus the past.
If you don't use indicators, then you're taking the strong position that they don't matter, which is more contrary to the evidence than using them. Unfortunately you either have to use indicators or not use them. So an "I don't know" opinion is still a definitive decision that they are worse, which is probably an incorrect decision.
Bad compared to everything else in the current investment climate, not so much.
CAPE of 25 corresponds to a yield of 4% before growth in earnings is taken into account. That's still pretty good compared to the yield on treasuries and just about anything else right now.