US Markets Risk

masonic

Discussion has been had elsewhere that business sectors are quite flawed as a category filter for companies. For example, two of the principal financial services providers that are relied on in many businesses, Oracle and Sage, are not considered to be in the financial services sector.

It's already been discussed that there are also companies missing from the tech sector. But it would be interesting to understand how big the sector was around 2000. A cursory look suggests is was in the 40s%.

chiang_mai

https://forums.moneysavingexpert.com/discussion/comment/82023892#Comment_82023892

Given that Oracle and Sage are primarily software companies, that's not surprising!

And since the Dot Com bubble burst in 2000, that 40% figure is not surprising either. EDIT TO ADD: It's interesting to note that the all time low to the peak, 1990 to 2000 took ten years. The most recent trend began in 2016……!

masonic

I agree, it shouldn't be surprising, and is the explanation for why financial services companies make up a small portion of the market, despite business penetration - financial service products embedded within businesses are provided by companies sitting outside the sector.

I don't see how "the most recent trend began in 2016". It began in 2009 or 2020 depending on how you look at it. There is no "10 year rule" to market cycles. People have been stating the US is dangerously overvalued since the early 2010s. At some point they will be vindicated, but there's been a long wait.

chiang_mai

https://forums.moneysavingexpert.com/discussion/comment/82024338#Comment_82024338

I could easily accept the period up to 2016 as "normal" growth, it's only after that date things start to look exceptional, that's why.

I don't know if it's a bubble or not, neither does the market and its more informed participants. I do note however that everyone tends to continue to particitpate in these things, until the popping starts and there can no longer be any question. Each individual must decide for themselves what it is or isn't and whether they wish to partipiate or not, it's not my role or wish to tell everyone that it is, only that they need to look closely and decide for themselves, rather than being blind to the potential issues and accepting the status quo.

InvesterJones

https://forums.moneysavingexpert.com/discussion/comment/82024361#Comment_82024361

So from 1990 to 2000 was almost 30pp to the peak, are you suggesting that as since 2016 the tech proportion is only up 15pp, we've got another decade to go and the peak will be closer to 50%?

chiang_mai

https://forums.moneysavingexpert.com/discussion/comment/82024375#Comment_82024375

Are we not into tea leaf reading territory here!

I think everyone can form their own opinions on what the numbers say.

I get that you and Masonic don't think this is a bubble and you may well be correct. The problem is, the markets don't know what the answer is so there's zero mileage in trying to win a debate and prove that it isn't. I think this exercise is about raising awareness of the potential for increased risk in members portfolio's so that everyone can decide for themselves, what's the best thing to do. The guy that's sat holding only an S&P500 Market Weight tracker is facing increasing risk. Similarly, the investor who's holding only a global index tracker that has a 74% US markets weight, is in a similar position.

I've decided what's right for me and I have acted, but I'm certainly not going to try and impose my answer on anyone or try to convince others I'm right.

InvesterJones

I wouldn't try and predict future performance from the data you presented, no, I was trying to understand what you meant by "It's interesting to note that the all time low to the peak, 1990 to 2000 took ten years. The most recent trend began in 2016……! " - were you not projecting from the 1990 to 2000 tech share and thus saying we've got more to go if starting from 2016?

masonic

I'm quite open to it being a bubble, but I'm far less convinced that it can be timed with a trend or repeating pattern.

chiang_mai

https://forums.moneysavingexpert.com/discussion/comment/82024429#Comment_82024429

Not really, it was dark humour that we're once again at the ten years mark, as before the dot com crash.

chiang_mai

https://forums.moneysavingexpert.com/discussion/comment/82024476#Comment_82024476

I agree, it cannot.