So, where this is going?

sebtomato

My current understanding is that many stock markets are at all time high, like the Dow Jones, so probably ripe for some correction. US tech companies account for a lot in the Dow Jones index. S&P 500 is at its peak too.
In the UK, the FTSE100 is still about 10% below its past peak, whereas the FTSE250 is at his peak too.
So where this is going?
Are we heading for a correction, at least in the US, despite the fact that the economy itself is likely to recover from the Covid crisis?
Will the FTSE100 reach again its peak over the next 6 months?
Should I keep investing in stock markets or keep some cash waiting for a correction (and some bargains)?

kinger101

The stock market spends most of its time at or near an all-time high.  Just like lots of other things such as world population or annual sales of jam.  We are definitely heading for a correction because we always are.  Unfortunately, we have no idea when because the timings of corrections are not predictable like tides.  On average though, investing today is always better than investing tomorrow.
 

MX5huggy

The S&P has been at an all time high since 2013, have you been waiting for 8 years? 

Swipe

sebtomato said:

...or keep some cash waiting for a correction (and some bargains)?

That's what your emergency fund is for. On a serious note, rather than hold bonds, I always keep some cash for potential corrections or bargains.

barnstar2077

As others have said, the stock market generally goes up over time, or why would you invest in growth funds in the first place?  There definitely will be a drop coming, but trying to predict one is a bit like using "the law of averages" to decide if the ball is going to land on red or black.  Unlike roulette though, the world we live in changes constantly, massively over any ten year period, so who knows when there will be a big correction. 

sebtomato

MX5huggy said:

The S&P has been at an all time high since 2013, have you been waiting for 8 years? 

Sorry, didn't realise the S&P has never dropped significantly over the last 8 years... 

sebtomato

kinger101 said:

The stock market spends most of its time at or near an all-time high. 
 

Clearly not the FTSE100 over the last 16 months... 

george4064

sebtomato said:

MX5huggy said:

The S&P has been at an all time high since 2013, have you been waiting for 8 years? 

Sorry, didn't realise the S&P has never dropped significantly over the last 8 years... 

To be fair, MX5huggy isn’t saying that the ‘S&P has never dropped significantly over the last 8 years’, but was making a general point that the market tends to move upwards.

Looking at the last 8 years, with a few exceptions (see below) every ‘significant drop’ has seen the S&P recover back to that level and March on higher within a few weeks/months. Using data for CSP1.LON, the longest time it took for the fund to return back to its  all time high after a big fall was back in February 2020 when the S&P fell about 22% from 21 Feb 2020 to 21 Mar 2020, and it wasn’t until about 16th Aug 2020 until it recovered back to its last highest point in 21st Feb. Since 16th August 2020 to date the ETF has climbed a further 17%.

Similarly from July 2011 to January 2012 saw a similar ‘flat’ period, when the market fell from is 1 July 2011 peak and recovered back to that all time high (at the time) in January 2012. So a similar 6 month ‘recovery back to previous high’ period. As you can see over time, that 6 month ‘blip’ is so insignificant with what the index has returned since.

All in all, looking back to 2010 on the chart below, an investor would be sitting on a very nice ETF holding if they invested as much as they could afford to as soon as possible, and hopefully also regularly contributed with monthly purchases.

Evidenced below, the S&P 500 has always produced a positive return over every rolling 6 month period, with one exception with the ‘worst’ being when the market was flat between April 2015 to March 2016, 11 months or so. Not a bad deal if you ask me, especially with a TER of 0.07%.

Disclaimer: I hold the mentioned ETF as my core US equity allocation.

EDIT: Would also like to add that this isn’t just an anomaly with the S&P 500, a very similar story can be said for the wider stockmarket. SWDA.LON chart below.

kinger101

sebtomato said:

kinger101 said:

The stock market spends most of its time at or near an all-time high. 
 

Clearly not the FTSE100 over the last 16 months... 

The FTSE100 is only a small part of the stock market, and the last 16 months isn't most of the time.  When investing, you also need to consider dividends too (just like you'd consider interest if you stuck it in the bank rather than say £10K deposited in 1986 is worth £10K today).

  

sevenhills

sebtomato said:

Will the FTSE100 reach again its peak over the next 6 months?
Should I keep investing in stock markets or keep some cash waiting for a correction (and some bargains)?

A large factor in stock prices is the price of the currency, at least that is what they were saying after the referendum.

The pound was worth more than 1.4 Euros prior to 2007, but from 2009 its been worth around 1.2 Euros, £1 is now worth 1.15 Euros

bostonerimus

These questions are meaningless. Set your allocation, invest regularly and let time do the work for you rather than worrying about short term market volatility.