An Urgent Warning For ALL Investors
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THE BULL MARKET
The current bull market began in late 2022, and the S&P 500 has returned roughly 129% since then. Every major dip has recovered quickly, reinforcing the belief that buying every decline is easy money. Retail investors are now buying down days at record levels, while the S&P 500 has averaged about 14.8% annually since 2009, far above its long-term average.
THE LOST DECADE
Markets do not always recover quickly. After the 1929 crash, the Dow took more than 25 years to regain its previous high. From 1966 to 1982, inflation-adjusted returns were disastrous, and from 2000 through 2009, $10,000 invested in the S&P 500 actually fell to roughly $9,089 including dividends. Japan took more than 34 years to regain its 1989 peak.
VALUATIONS ARE EXTREME
Stocks are more popular than ever, with roughly 33% of American household wealth invested in equities. The Shiller CAPE ratio recently reached about 41, its highest level since 2000, while the 10 largest companies make up around 39% of the S&P 500. Margin debt is also at record levels, increasing the risk if markets reverse.
Several major firms expect weaker returns ahead. Vanguard projects roughly 4% to 5% annual returns for U.S. stocks over the next five to ten years. Goldman previously projected just 3% annually before later increasing its estimate, while GMO has forecast negative real returns for U.S. large-cap stocks. High valuations are the main concern.
Others remain optimistic. Deutsche Bank, Morgan Stanley, and Yardeni have raised S&P 500 targets, supported by strong earnings growth and nearly $8 trillion sitting in money-market funds. Historically, the average post-WWII bull market lasted roughly 5.6 years and gained about 167%, meaning the current bull market is not unusually old yet.
EXPERTS CAN BE VERY WRONG
Watch on YouTube · Video by Graham Stephan
