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> But for many seasoned stock market observers, the existence of continuing worries about whether the bull market can last is a strong piece of evidence that it
by xhrpost 8y ago
> But for many seasoned stock market observers, the existence of continuing worries about whether the bull market can last is a strong piece of evidence that it can.
>According to this line of thinking, the moment to worry is when there is broad agreement that the market can only go higher. That would suggest there is little fresh money to drive stocks to new heights.
This is what I keep wondering about. It seems like everyone is just waiting for the crash to happen for the last 5 years. The slightest downtick seems to send people into a tailspin. Thus, possibly enacting it's own self balancing mechanism? I can't tell, but then, neither can anyone else.
- tabtab 8y agoIt's hard to argue there is not a lemming effect in the market. If the "spook level" reaches a certain threshold, then a mass of investors all bail out at once, and it snowballs. Professional investors are trying to time their sell point so that they bail early in the crash instead of late. (Warren Buffett has mostly ignored this strategy: he just waits for good deals to appear, such as low PE ratios, regardless of the general market trend.)
- wtvanhest 8y agoProfessional investors do not time markets.
- the_gastropod 8y agoSure they do! They just may or may not be any good at it.
- wtvanhest 8y agoNo they don't. There are a few exceptions, but the vast majority of assets are managed but asset managers who have mandates to stay fully invested. Only niche hedgefunds time markets.
- oillio 8y agoSector rotation is a pretty popular strategy. The manager stays fully invested, but they move the investment to different sectors, trying to time which sectors will be hotter than others. Just one example of a way to stay fully invested while also timing the market.
- tabtab 8y agoAn example: expensive products, like new cars and refrigerators, tend to slump more during general downturns. Thus, fund managers may shift out of car & fridge stocks into something with smaller consumer price tags, like soda stocks.
- wtvanhest 8y agoSector rotation is not considered timing by professional investors.
- icedchai 8y agoIt depends. Many managed funds have huge turnover percentages, tons of active trading, etc. Those asset managers are definitely attempting to time the market. This is more than just hedgefunds.
- RickJWagner 8y agoYou are actually right, many do not. See the site 'Bogleheads' for a gathering area for folks of this type. They make some strong arguments for their thinking.
- wtvanhest 8y agoI worked on two different small (sub 10 people) investment teams with over $10Bn each under management while at BlackRock. 50% of my time was dedicated to competitive research on other actively managed funds. I'm confident that the vast majority of assets are with funds that are mandated to stay fully invested. Only the smallest rando institutional investors wanted to time the market. There is no research that says timing is a valid strategy (yet!)
- ahelwer 8y agoSure everyone is worried, but are they worried enough to stop plowing their biweekly paychecks into index funds? Time in the market is better than timing the market, as they say! At most, people I know have changed their asset allocation to include 5-10% more bonds. The stock market's index fund tailwind is still going strong.
- ptero 8y agoA few thoughts: huge amounts of money are now invested in passive funds and indices. Passively invested money, especially in retirement funds, tend to be less likely to suddenly flow out (and cause additional stock selling and further pressure prices) based on relatively minor drops. However, if that behemoth does start to move it could, in theory, bring prices much lower than a bunch of disconnected folks reacting in a knee-jerk fashion to bad economic news. Also, with low latency and algorithmic trading I suspect many large investors think that they can move out in time to avoid major losses. If so, they are sitting in while there is no correction and are not upsetting the bull market. Should things go badly they will likely try to move with lightning speed (getting out before most peers do). If enough money managers think this way they can create a pretty powerful shock when they try to outgun each other. Thoughts from the armchair, I am not in the financial industry.
- graeme 8y agoI've wondered about that. Could index funds be good in most times, but create the mother of all crashes? I haven't really read any good analysis on how the rise in index funds could affect the next crash. Does anyone know of any? (They may not have any negative effect)