Has the stock market peaked?

danlightbulb

Hi all,

I recently posted in the pensions section about my pension pot and how I have the option to choose which funds my money is invested into.

If Im invested in equities through my pension fund, and equities have peaked (i.e stock market has peaked), then I should move my money into bonds or cash, wait for the correction, and then put the money back into equities to benefit from the next growth cycle.

So have equites peaked? I know this is a question only really answerable in hindsight. But when I search around the internet on this subject, there are so many investors/experts on the subject highlighting so many signs that it has peaked and will shortly begin to correct.

Interest rates, price to earnings ratios, typical length of bull cycles being exceeded. These are just some of the things I am reading about.

I'm not looking for someone to say its X,Y or Z. Everyone will have their own strategy. But what are the general feelings of people? What do people think?

Dan

Biggles

Of course it's peaked. It's always peaking. It's peaked before and it'll peak again. If you take your money out, you'll miss the next peak.

Pension investing is long term. Just sit tight and enjoy the ride.

jimjames

How can it have peaked when the previous high is more than 10% higher than the current level? That's just for the FTSE100. There are markets around the world that are far lower.

If you are drawing your pension then you may want to move to less risky assets. If you are investing for the next 30 years then why would you sell out? Surely you'd want to buy more at the lower level to increase the level of growth.

Timing the market is impossible, by the time you think it's time to get back in you're more likely to be above the point you sold. In the meantime you've missed out on the 4% pa income from shares.

danlightbulb

Biggles wrote: »

Of course it's peaked. It's always peaking. It's peaked before and it'll peak again. If you take your money out, you'll miss the next peak..

Not if you put it back in before the next rise. I'm not talking about little peaks, but major peaks. Major corrections.

jimjames wrote: »

How can it have peaked when the previous high is more than 10% higher than the current level? That's just for the FTSE100. There are markets around the world that are far lower.

So it could already be correcting then, the FTSE100. Why wouldn't you move out of the FTSE and into the world markets that are in a different part of the cycle?

jimjames wrote: »

If you are drawing your pension then you may want to move to less risky assets. If you are investing for the next 30 years then why would you sell out? Surely you'd want to buy more at the lower level to increase the level of growth..

You'd sell out to solidify the benefits of the last growth cycle. Wait for the correction to occur, then buy back in. If you stay in the equities while they are correcting you will lose money! Why isn't it better to come out, wait, and go back in when the correction is over.

And again, I'm not talking small corrections, but big whopping corrections. The kind that we see only every decade. 20% or more of a correction, like the dot com bubble.

Sam_J12

I think there are arguments that the stock markets may have a difficult time over the short and medium term, but I see nothing to suggest that long term growth is at risk and the long term is what matters for you pension fund (assuming you are not close to drawing it!). I have most of my assets in cash as I am buying a house shortly, but if I didn't then I would be invested 100% in equities right now.

Attempting to time the market based on gut feelings (e.g. what commentators say) has been shown to reduce returns in the long term for typical investors. There are some actively managed funds that specifically look to reduce losses in downturns, which may be worth your looking into, at the cost of gains when markets are rising. It could be worth looking into, although I can't offer any advice on the wisdom of these funds.

danlightbulb

The problem is that a major correction will wipe out a fund. Before a major correction everyone is always in denial. Then it happens and everyone says 'we should have seen it coming'. There are signs a correction is due according to many experts.

Long term growth absolutely, but youd get more growth if you pull out at the right time and go back in after the correction.

Archi_Bald

danlightbulb wrote: »

The problem is that a major correction will wipe out a fund.

It would need to be an immensely risky (e.g. single sector) fund for it to be entirely wiped out. Or an apocalyptic event that will remove the need for money for most people in the world.

The entire essence of risk management is that your investments are in the form of a balanced portfolio. So you don't get wiped out if a particular company or sector tanks.

jimjames

danlightbulb wrote: »

The problem is that a major correction will wipe out a fund. Before a major correction everyone is always in denial. Then it happens and everyone says 'we should have seen it coming'. There are signs a correction is due according to many experts.

Long term growth absolutely, but youd get more growth if you pull out at the right time and go back in after the correction.

Sounds like you've already made up your mind and know the answer so wonder why you asked the question. Make sure you let us know in plenty of time when the next correction is and when to buy back in again.

danlightbulb

Lol of course I haven't made up my mind.

Are you all bulls? In denial that one will happen? Or just diversified so much that it won't effect you much (but then your growth won't be maximal either will it).

Haven't there been huge corrections before that have wiped out peoples pension funds, shares etc?

Looking at a FTSE trend over 50 years the peaks and troughs are obvious.

EdGasket

I had a fund completely wiped out and there wasn't even much of a crash going on. Edinburgh New Tiger fund that morphed into a split capital 'high income' fund then went bust. 50p issue price to around 15p for the New Tiger fund then 15p to nothing; all in a few years!

masonic

danlightbulb wrote: »

Are you all bulls? In denial that one will happen? Or just diversified so much that it won't effect you much (but then your growth won't be maximal either will it).

It's inevitable there will be a crash in the future. It is impossible to determine when, how far markets will fall, or how long it will last. So, unless you like to take a gamble, you are better off staying invested.

Haven't there been huge corrections before that have wiped out peoples pension funds, shares etc?

Individual companies sometimes go bust. Often this isn't correlated with a stockmarket crash though. It is a very rare event for a fund to be wiped out. In order for that to happen all of the companies it invested in would have to go bust at the same time or there has to be some sort of serious mismanagement/fraud.

Looking at a FTSE trend over 50 years the peaks and troughs are obvious.

They always are with hindsight. Unless you have a time machine, or your charts extend into the future, looking at trends isn't very helpful in predicting future events.