Morningstar Fair Market Value Chart -- Cheapest Since 2012

davfor

I just returned from an "out of the country....away from the noise" trip and am catching up on recent happenings. Its interesting to see M* is now saying the market is the cheapest it has been since mid 2012. My gut suggests the economy will probably keep chugging along in 2019. So, I am scratching my head about how much cheaper the market will get in the near term. (I just added a little to my stock holdings today as part of my year-end rebalancing exercise.) Anyway, here is a link to the chart...click on MAX to see the long term version....

https://morningstar.com/tools/market-fair-value-graph.html

expatsp

M* says the market is 10% undervalued? For me, that's not enough margin of safety to increase my equity allocation in light of what I see as political risk. I also got burned a bit by following M*'s valuation advance during the GFC: all these stocks looked undervalued, then M* started cutting their estimates based on the changed scenario...

Old_Joe

"Fools rush in..."

davfor

@expatsp Yes. I recall scratching my head and being somewhat disappointed in M* about that history rewrite after the market rebounded from the 2007 - 2008 selloff. Its just interesting to note what they are saying now. (Its my understanding M* modified their methodology somewhat last summer.) My year-end rebalancing exercise will probably result in the portfolio category allocations being quite similar to what were at the start of the year....unless something really drastic happens during the next couple of weeks.

Old_Skeet

In comparison, to Morningstar's valuation graph, Old_Skeet's market barometer has the S&P 500 Index at a reading of 180+ which marks it at extremely oversold on the barometer's scale by about 20%. For me to start buying equities at this point in time, in this falling market, I'd need to see a reversal in the barometer's reading. Currently, I've been just watching the action and building cash as my mutual funds are now making their year end distributions which I take in cash. I'd like to think we are working on a bottom; but, with rising interest rates it makes investing on margin more costly. And, with this, it seems, big money continues to deleverage as interest rates rise. In addition, short interest in the Index has been rising (not falling) as more and more investors are now shorting the Index.

I've been reducing my allocation to equities by about 10% within my portfolio as interest rates continue to rise and have increased both my allocation to cash and to fixed income by about 5% each. I am pretty close in getting to my target allocation of 20% cash, 40% bonds and 40% stocks. Within equities I am favoring an overweight to the traditional defensive sectors plus a few others (real estate and telecom being two of them).

Since, I am retired and my portfolio kicks off a good income stream I've elected to stay invested rather than selling out and lose the income stream plus I'd have a sizeable capital gains tax bill to pay as about 65% of my invested assets are in taxable accounts. My portfolio was built over time mostly through the organic growth of invested assets although I have done some trading as well.

I have a fund (CTFAX) that has been buying stocks as the market pulls back. It is now in its 4th buy step. With each equity buy step that the fund makes increases the fund's equity allocation by about 5%. Currently, the fund is about 70% bonds and 30% equity. It is normally is about 90% bonds and 10% equity. As the market recovers and begins an upward move the fund then starts to sell down equites and load bonds. This fund has automated, for me, the special investment positions (spiffs) that I use to manually make. However, once the dust settles in my rebalance process I've been thinking of putting an equity spiff postion in play most likely in an equally weighted S&P 500 Index fund as there are currently, as I write, only 12% of the stocks in the 500 Index above their 50 day moving average. It seems few are looking at forward earnings as they continue to be relative strong with 2019 forward earnings estimates in the $170.00 range. At current valuation of 2507 / forward earnings of $170.00 = a forward P/E Ratio of 14.74. This equates to a forward earnings yield of about 6.8%. With this, it seems, to me, there is some good value to be had by being invested in equities.

And, so-it-goes ... I wish all "Good Investing."

Old_Skeet

An update: With the market closing today (12/20/18) I am finding the S&P 500 Index at a reading of 2467. According to CTFAX's buy matrix the fund has now reached its 5th equity buy step. This should put bonds at about 65% and equities at 35%. I am also finding that the Index is off its 52 week high by about 15%. Hello ... Plundge Protection Team time to take some action.

catch22

I chose 4 funds I'm a bit familiar with just for the heck of graph city going back to May, 2011 and to look at the lines as to what anyone may consider a fair or not so fair price from those days, through today.
>>>So, the chart funds.....well, Fido health is a decent long time, fairly broad based fund. Fido balanced, well within the high end of returns for similar funds. Fido Growth has a decent long term record and represents a broad group of growth stuff. ITOT is a kinda SP500 with a dash of mid and sm cap U.S.
>>>The chart starts with May, 2011 when Europe was still having monetary fits and the soon to come downgrade of U.S. gov't issued debt put a bang in the equity markets for a spell. Moving along, part of the 2015 and 2016 period were sideways, as reflected in the charting. And on to now.........
A semi random mix of equity types and bonds with FBALX, all U.S. directed. Non-U.S. is a different critter not covered here.

Go ahead, its okay; decide for yourself. Any of these in the chart undervalued since 6 years or so ago? Me? I'm just a profit pig and attempt to buy as low as I think I "see" and sell with what seems a reasonable profit.
I'll leave the link open for viewing the tickers.
https://stockcharts.com/freecharts/perf.php?FSPHX,FBALX,FDGRX,ITOT&n=1922&O=011000

OK........pillow time here.....good night.

Old_Skeet

@Catch22: Nothing wrong with trading and making profit. I use to do it a good bit with my spiffs.

Derf

@Catch22: Did you realize your chart came with a free pop-up ?
What would you consider a reasonable profit ?
Thanks for your time.
Derf

hank

It’s beginning to resemble a mild correction. Just “ball-parking” the numbers on the Dow, it appears to be off around 10% (give or take) from the year’s high. I’m sure the NASDAQ is more badly beaten up than that.

Re speculation elsewhere on the board that Individual #1 might invite Yellen back: She’d have to be crazy!

catch22

@Derf
Yes, there is always a pop-up; and a simple "x" clears this, yes?
Did this cause your electronic device any problems?
We've never knowingly been solicited with spam mail or otherwise related to the site.

MikeM

I'm looking at a few great companies that are starting to look like Christmas-eve shopping specials, prices marked down 30-40% from their recent highs.

A couple days ago I renewed a position in Alibaba (BABA) that I sold out of earlier this year. It is 35% lower than it's top. Also added a little to FedEx (FDX) at a 40% drop from highs. I'm not super confident in it's current prospects but long term I think FDX may be a bargain at current price - fingers crossed. Apple and Amazon are on my radar. They have already dropped 24-29% respectively.

These aren't big bets. Just my play-money allotment.

Old_Skeet

Thought I'd share. Back in my days in elemetary school we had a daily show and tell. Now, retired we still have a daily show and tell among some of my old classmates. So, here is my "show and tell" for the board.

In viewing Morningstar's Market Valuation Graph this morning (1/16/19) and converting its reading of 0.92 to Old_Skeet's market barometer scale I come up with a score of 162 for the graph indicating oversold. In compairson, Old_Skeet's barometer (which follows the S&P 500 Index) based upon its metrics has a reading of 156 which reflects that the Index is undervalued.

Have a great day ...

Old_Skeet

Derf

@Old_Skeet: Thanks for the info. I was wondering if you put any of your powder to work.
I haven't made up my mind to purchase more CD's or equity as of yet.
Derf

Old_Skeet

Hi @Derf and good morning. Thanks for your question.

I did put a little bit of cash to work recently opening first step positions in DWGAX, INUTX, PONAX and TEQIX since I have now reached my new asset allocation of 20% cash, 40% income and 40% equity. My focus this year is to grow my portfolio's income generation while maintaing my asset allocation along with achieving some growth of principal. Over the past five years my portfolio's income generation has ranged from a low of 3.0% to a high of 5.3% with an average of 4.4%. I'd like to get my income average a littler higher. Ten years ago its average was north of 5%. As most of us know yields have dropped during this time frame but are now (more recently) back on the rise. Even with the past, and more recent, market swoons my portfolio's total return has been better than nine percent annually over the past ten years; however, I also held a greater percentage in equities earlier than I presently do. At one time I was about 70% equity but I have now reduced this down to 40% equity (through time) due to an age based asset allocation realignment. Now being 70+ years in age I consider my present asset allocation, noted above, to be an all weather asset allocation, for me, as it holds ample cash, generates ample income, and should still grow my principal over time.