Hey Tom, not sure about your assertion that the market is overvalued. Many reports say that the historical SP500 avg PE has been around 20. If that's the case, then we are not undervalued at all. In addition, there is another way of measuring value. I think it's something like the inverse of 30 year bond yields or something like that. I'll root around and see if I can find the article, but many economists thing we are undervalued based on historical means.
Also, I do believe that the market has priced in future terrorist actions, double dips and other negative factors. Right now, confidence is just as bad to the downside as it was good when we were in the bubble. The rule of them when thinking about whether something is priced into the market is whether or not you are thinking about it. If you are, then that same knowledge is out in the market, which means it's priced in. So if you are worried about terrorist actions, then so is the market.
Anyway, I'm about 70% stocks, 15% bonds, 10% money market funds, and 5% cash. Throughout Sept and Oct, I will be moving my cash into stocks. Plus, I'm continuing to invest my monthly automatic account builder plan and my biweekly contributions into my 401K, into primarily stocks. I doubt we're going to get a rocket recovery, but I think we are entering a period of normal growth again. Growth of any kind means that stocks will outperform bonds, especially in a period of rising interest rates. Good luck! |
