Most people assume that the S&P 500 Index will go up over long holding periods

januari 08, 2025

But even as an adherent to Siegel and Bogle’s principles, the near-universal acceptance of the “stocks always go up” mantra is starting to worry me.

In a memo published Tuesday titled On Bubble Watch, legendary investor Howard Marks reflected on perhaps the most prescient call of his career: an essay published 25 years ago that warned about irrational behavior in dot-com-related stocks.

If enough people believe stocks are a sure thing, their price-insensitive buying can push prices higher for a considerable time, reinforcing those initial beliefs

In a sense, the few drawdowns that have taken place have only reinforced the urge to go all-in on the S&P 500, because stocks have inevitably roared back.

Wall Street strategists, who generally doubted the market’s potential in 2023 and 2024, have now caved to the view that the real risk is staying on the sidelines.

S&P 500 trades at about 22 times blended forward 12-month earnings, a multiple that the index has only exceeded in the periods 1998-2000 and 2020-2021 in data since 1990.

The sensible next step would be to reacquaint ourselves with some of the investments that aren’t nearly as popular, starting with 10-year Treasury notes now yielding around 4.7%.

Jonathan Levin Bloomberg 8 January 2025

https://www.bloomberg.com/opinion/articles/2025-01-08/can-howard-marks-spot-a-stock-bubble-twice

I’ve long believed a psychological diagnosis is more effective. I look for highly irrational exuberance

In short, bubbles are marked by bubble thinking.

https://englundmacro.blogspot.com/2025/01/is-us-stock-market-in-bubble-territory.html