No one knows when the grossly overvalued and risky market tops. It could be today, next month or next year. One can’t know when the top is but one can always know how high the risks are. If it were me, I wouldn’t be risking 25% of my 401k in overvalued assets.
The Fed can’t stop bear markets. The Fed had been stimulating before the market fell 30% in 30 days. They couldn’t prevent that. They couldn’t prevent the bear markets of 2000 and 2008 either, etc. History proves that.
So, it’s why you buy something because the company itself is solid and the company itself is cheaply valued, rather than hinging things on the Fed saving everyone. It’s a false belief that people have.
At the topping phases of waves 5 and B, the sentiment is never more bullish and people think stocks can’t go down. Yet, that’s when the have the highest risk that they may fall.
There are numerous ways to gauge bear markets. One widely held one is when the market drops over 20% from its top, they consider it a bear market and not just a corrective pullback. By that definition, we just had a super-short bear market in that last/latest crash. I don’t personally gauge them that way. For me, when its trending up, its a bull market and when its trending lower overall, its a bear market. Real/true bear markets aren’t typically just a quick blip on the chart, like we saw recently.
So, one could argue that we’re still in a bull market and one could also argue that we had a bear market for about 30 days or so and went back into a bull market. To me, when the “real one” comes, you won’t have to guess about it. It will be as clear as the nose on our faces. The volatility is just increasing and that tends to happen a lot in toppy periods.
Bottom line: These are not the conditions where I’d want to risk 10% of my 401k, much less anything higher. The long-term chart screams high risk for those noting the signs. So I’d stay out of it, if it were me.
I love the conversations over the weekend. I’m glad you all are interacting then. Totally agree with Bekka and Thankful.