I have been very hesitant to change investment strategy over the years based on short-term market conditions. However, in this current situation, it is almost like smelling a storm coming.
Right now I am building up cash/money market sweep in my surplus taxable investments. Haven’t decided if I am going to rebalance anything in the retirement vehicles, as wife & I are still in our 30s and have a long way to go before needing to live off of it. There is a significant risk I will misjudge the market conditions & that could have big consequences impacting decades.
With that said, I do not blame those close to or currently in retirement one bit for proceeding with extra caution right now.
For me, it’s like the old saying that a leopard can’t change its spots. We both have been pretty aggressive investors for a long time. I’ve been in the market this since mid-70s, but the market today is totally different place from the time when I invested in the Fidelity Fund by having them mail me the forms and I mail them a check. I simply have a lot less interest investing based on current psychology and hype than on sound financials.
So, we are making the slow trip to more conservative investing.
My family’s net worth has grown by 2.8% in the past week alone, which is not at all atypical of late.
It has increased by 60% in the past 12 months, which seems insane, especially given that we have been through (really still going through) a recession from the pandemic that is still not over.
Here is a very poignant article about what may happen to the wealth of baby boomers, which is much greater that the wealth of millienials when they were our age. Be very afraid!
Something I intend to do shortly is tally my investment positions and calculate how much gold that would buy. Then do the same thing for my equity values a year ago.
That will give more of a true picture of increase in net worth, if any. It is unfortunate that inflation makes it difficult to put a REAL value on portfolio performance. Only a nominal value performance is obvious.
The valuations are insane right now. I am still investing but it is the same amount. I am not investing more or less. Just the same amount each payday. My goal is to keep the same amount as it goes up or down.
Thank you for noticing this as I have. Be sure to mention it to your representative in Washington when they agitate for increasing capital gains taxes.
Many countries, Singapore being one, don’t even tax capital gains.
My House Rep in DC is Deb Haalland, about as liberal as one can be and reported to be Biden’s Secy of the Interior. She would say that capital gains should much more heavily taxed.
I fully expect her, Buttigieg in Transportation, Granholm in Energy, Regan in the EPA and John Kerry, to work in tandem to put company killing squeezes on oil and gas production, raise mileage standards, tighten the noose on natural gas for electric development and throw boatloads of money at wind and solar.
I just looked at all my family’s investment accounts and was astounded at the nominal value increase. On portfolios that only invest in dividend-paying stocks!
The market is telling us that it expects higher nominal earnings, and stock prices reflect that. I stress the word NOMINAL, as it is not clear that after inflation the earnings increases will be real.
Remember the credit boom of the 1920s caused a stock mania as well. Now even a higher percentage of American own stocks, and a lot day trade. Commissions have gone to zero on some platforms, so the conditions are perfect for rampant speculation.
Remember that any forgiveness of student loans will be a de facto credit expansion, as the debtors will be then free to take on consumer debt they could not before.