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Here is a link to the article.“If you believe the market... there is an expectation of a severe economic disruption coming in the form of school closures, no large gatherings, widespread business closures, and everything else,” Bianco said on The Final Round on Wednesday.
“....the old 20 P/E is now going to be a 12 to 15 P/E,” Bianco said. “That means the market's going to go down 20% or 30%. Alright, it went down half that – around 10% or 15% so far. So we're about halfway there right now.”
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I still remain in the "disruptive" mode thinking camp with our investments. Covid-19 and the implications going forward will continue.
Other sources have mentioned that most of the rise in the S&P 500 over the last 6 months or so has been fueled by stock buybacks by the companies that were given huge tax cuts recently. Remember how we were all told about the need for those tax cuts in order to create all manner of new jobs and increased production and so on and so forth. I fail to see much evidence of any of that occurring and you can't blame that on COVID-19. That activity predates the virus.
@Mark There appears to be a lack of good investment alternatives. I wonder where those boomers will invest that cash. Or are you suggesting they might just sit on it until some time after the dust settles?????
If the boomers just sell to be out of equities I'm guessing many of them will either buy annuities or bonds, bond funds and possibly CD's or treasuries despite the low returns. It gives many comfort just being able to see their stack of cash not being whittled away by market downdrafts.
These are all just my best guesses, I have no clue honestly.
Shiller's CAPE, Tobin's Q, Buffet's Yardstick, you name it; you can't say we weren't warned about the avalanche conditions.
Stocks had one of the longest bull markets and they will correct. Most investors, including most retirees that don't have enough, will have to be in stocks.
There are several bonds funds, mainly in Multi sector + NonTrad that can still make 4-5% with a yield higher than 4% and thankfully are not discussed in most articles and the media. PIMIX is huge and famous but the rest of them are still small.
and of course, you can own FI CEFs like PCI which beat SPY since 2016 (when PCI started their new style to be closer to PDI) for performance, SD, Sharpe, Sortino and can be a better option with yield over 8%.
PCI vs SPY vs VT (link). VT is another proof why diversification didn't help you.
Probably, the easiest way and especially for accumulators is to select an asset allocation to march their goals and rebalance when it's off by 5%.
For retirees who have enough, Kitces and Pfau (link) concluded: "Declining equity glide paths do not necessarily help support retirement success. Static allocations generally fare worse than more conservative starting allocations that rise in equity exposure throughout retirement. Depending on the underlying assumptions, the optimal starting equity exposures are generally around 20 percent to 40 percent and finish at around 40 percent to 80 percent."
Thank you, Derf
wild
I'm glad I emphasized high quality, and shorter durations, when I rebalanced my retirement account to about 50-40-10 from 70-20-10 this past December.
This article from Bloomberg (via Yahoo) seems to indicate that the panic is spreading into bonds: Just this morning M* was pondering stock correlations moving to one.
Will bonds join in? They will if people begin to doubt whether they are liquid.
I'm leaving the taxable account alone. That's for the kids to enjoy when the time comes. However, there's plenty of cash for the next time prices appear reasonable. FOMO is not a problem I have when I look at over-valued markets.
The skewing of wealth in favor of the older age groups shown in that chart has probably increased significantly since 2016 due to the continued bull market in stocks and real estate. Also, most of the stock market wealth is likely held by the average wealth households rather than median wealth households. That suggests the older households hold the vast majority of the stock market wealth held by households.
Based on the above quick and dirty look, I suspect a sudden withdrawal by seniors from the market would at least put a meaningful dent in it.
@davfor, I assume this is total household wealth (savings, home equity, other stuff)? Do you know? If so, I would think a bigger proportion of the gray-hair wealth might be in their home value, less in stocks and maybe the younger crowd less home equity, more investment equity. I don't know. Lots of interpretations can be made from the chart.
There is a chart in the first link that shows "Average Net Worth by Age (Not Including a Primary Home)"
https://dqydj.com/net-worth-by-age-calculator-united-states/
https://federalreserve.gov/econres/aboutscf.htm
Most articles, analysts, papers hardly ever discuss Multisector funds and the securitized bond category where you can find funds with yields over 4% and the possibility to make 4-5% average annually. They always discuss treasuries
And most never discuss CEFs. PCI beat SPY since it's the new mandate in 2016(similar to PDI) for performance+volatility + yield over 8%.