Is the stock market even real anymore?

graeme16

I have been an avid saver over the past 5 years whilst I have researched investing. I have primarily sat on the side lines and observed whilst dabbling every now and then. I have managed to save £100K over this period currently sitting in a S&S ISA ready to invest into a global tracker when the time is right . . . .

I appreciate this strategy isn't favourable amongst the intelligent on here, however since 2015/16 when I started looking at the markets, I felt as though I was late to the party and have been watching various fundamentals such as the bond yield curves etc. in an 'attempt' to predict the best time to 'dump' my money. I am by no means advocating this strategy and historical data would suggest this is not the one to use. 

It would 'appear' that this opportunity came and went in the blink of an eye in 2020 and the markets are continuing there relentless vertical climb into the stratosphere . . .  Now, to any one who hasn't been living in a cave, it should be obvious that this 'recovery' has been fuelled by Rishi cranking the money printers, as we did in 2008. Obviously this story has been repeated around the world by various leaders. 

I worry that the stock market has become less about investing in quality companies and more about an investment 'vehicle' being propped up by QE and passive investors. What happens when this QE stops? 

george4064

You must’ve now realised you have made a mistake by not investing back in 2015/16 up until now, and statistically speaking you will have the same feeling of regret if you don’t invest now and compare it to where markets will be at in 2026/27.

In short, invest as much as you can afford to, as soon as you possibly can.

Time in the market not timing the market.

Also, the opportunity here is putting your savings to work by investing it. You don’t have to wait till the market drops and an ‘opportunity’ presents itself, more often than not after taking into account any market drops that may or may not happen in the future you would be better off just investing now.

The longer you wait, the greater the damage this could have on your finances.

JohnWinder

graeme16 said:

..the stock market has become less about investing in quality companies and more about an investment 'vehicle' being propped up by QE and passive investors.

Why not active investors as well? If they've been putting money into the stock market they also are pushing up prices. Or have they been getting out of the stock market during this time?

Prism

When QE stops, if done carefully then equities and bonds likely stop going up as quickly as they have done. You might be waiting a very long time for it to stop.

Thrugelmir

There was an opportunity to buy into the unloved and much derided UK market in the latter part of 2020.  Signs are that the global reflation trade era is stalling and running out of steam. Time to revert back to quality and fundamentals. 

grumiofoundation

graeme16 said:

I have been an avid saver over the past 5 years whilst I have researched investing. I have primarily sat on the side lines and observed whilst dabbling every now and then. I have managed to save £100K over this period currently sitting in a S&S ISA ready to invest into a global tracker when the time is right . . . .

How long are you willing to wait? How much would markets have to drop for you to buy in ? (presumably more than say 20% or you would have bought in March 2020).

Another thing to consider is if and when you do invest what will you do if your investments drop in value by 20%, 30% 40%?

With no information provided as to aims for the money, expected investment timescale cannot comment on whether investing, investing via a Stocks and Shares ISA and specifically investing in 100% equities is 'sensible' for you. 
(I am taking 'global tracker' to mean 100% equities, although this may not be what you mean?)

graeme16

As stated in the original post, historical data would suggest that not waiting to invest and drip feeding over 'X' duration has yielded better results that trying to time the market. There is no need for the sell. I am sold on this idea.

What I am becoming increasing concerned about is the governments ability to essentially control the markets. This began heavily after the 2008 crash and what the current monetary policy demonstrates is they will stop at nothing to ensure the markets don't crash. Now I could have this backwards and the current market highs are a delayed reaction to their 'sensible' approach to keep unemployment in check following the recent economic shutdown. Maybe once this round of QE is over, the markets will drop. However, they will never be able to drop to what they should have been due to the dilution of our currency from the QE and the subsequent inflation.

As per @george4064 comments, passive investors shouldn't understand any market fundamentals and should blindly keep plugging there money into the markets. Is this not a recent phenomenon?
It is easy to say that you have the better strategy over me because the markets have rebounded and everyone who was stood on the side-lines have been left with there jaws on the floor in a puddle of regret, however I think we can all agree that the roles would be very much reversed had Rishi and Biden not stepped in and bailed the world out. Where would we now be if we had decided printing $3,000,000,000,000 wasn't such a good long term plan? Are people happy with the level of government intervention in there investments? We haven't historically had this level of intervention outside of war time, let alone over a bad round of the flu. 

Malthusian

This began heavily after the 2008 crash and what the current monetary policy demonstrates is they will stop at nothing to ensure the markets don't crash.

And what the 2008 crash and 2020 crash demonstrate is that the markets don't give a crap what politicians think and will crash anyway on a regular basis.

This is not new. Remember when Gordon Brown said he had "abolished Tory boom and bust"? Ask him how worked out.

Current market prices reflect the present perceived value of decades' worth of expected future earnings by global businesses. People who try to use them as a proxy to bet on the success or failure of current government policy are destined to remain extremely confused when they don't behave as they expect.

There is no evidence that anyone can consistently improve returns by timing the market.

Prism

Just a little note on the dilution of currency. If QE is done properly then no new money is created permanently. The central banks don't give money away, they buy government debt from the banks which then gets paid back on a regular basis until repaid. Unless of course the government defaults or QE never stops.

Had the central banks not stepped in then we would probably be in a full economic crisis right now with no furlough, no bank loans to businesses and mass unemployment so at the risk of creating a bit of an asset bubble I am glad they did.

MaxiRobriguez

You have £100k, you don't have to have it in all in stocks or all in cash.

Even getting 50% invested means you can benefit from any rises from here, and if there is a crash, well you still have 50% to double down with.

If you wait forever with your 100% you'll probably find reasons not to invest when the time is right, like what happened to you last year.

grumiofoundation

graeme16 said:

It is easy to say that you have the better strategy over me because the markets have rebounded and everyone who was stood on the side-lines have been left with there jaws on the floor in a puddle of regret, 

No people with a better strategy than you would have invested as and when the money comes in, rather than sitting in cash waiting for 'the' crash (and then not investing when 'a' crash came).

You picked a strategy in 2015 which backfired. You have to decide if you are going to continue with the same and potentially miss out on the next 5 years of returns or change tack now and potentially see your investment drop (or middle ground as suggested above).

We haven't historically had this level of intervention outside of war time, let alone over a bad round of the flu. 

Well with this level of analytical thinking why do you need us? Your interpretation of figures and graphs is clearly superior to the 'experts'. Where did you do your PhD and postdoctoral research out of interest?  And did you specialise in epidemiology, virology, statistics etc?