I believe the bull market of the past few years is getting long in the tooth. While it could certainly go on for another year, the risk of a large and swift downside move is building stronger each day. Stocks are certainly not deeply overvalued, but they are trading at a rich valuation. Investor apathy appears high when considering all the challenges that Europe faces, and the tightening in lending domestically. The velocity of money is slowing, even as rates decline. Fewer people qualify, the hoops to jump through are huge, and the banks are apprehensive in lending the money. In my opinion, it would be prudent to retool your portfolio to a more conservative balance at this time. Raise additional cash, and shave off some of the aggressive allotments in your portfolio. Again, the market may move higher still for several months, but I strongly believe a 30% to 50% decline will occur in the next 18 months from a deflationary wave. The de-leveraging process is still underway, and the bounce has to be used to fix balance sheets by prudent managers. The bear market from this process of reverting to a mean after the booming 90's has still been relatively tame. That is probably mostly due to an aggressive Federal Reserve here and abroad. They really don't have much left in the chamber to have a strong effect, except Q3. It's probably best to fire that after being tested by a deflation wave, but they may choose to be preemptive.
Today the Dow Jones is at 12827, currently. Even if it were to rise another 1000 points, I think it will fall 3000 or more, making it a risky prospect to be aggressively long.
* I am not a registered financial advisor. This blog is for entertainment purposes only. Please consult your financial advisor before making any decision with your portfolio.
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