Is it time to buy stocks yet?

Investment Analysis Clubs Macro Economic Trends and Risks
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I avoided stocks during the tech bubble of 1999 since it didn’t make sense for the index to increase by 25% when the economy was growing by 3%. This was clearly a bubble and I bought back in 2002 after the bubble popped. I have met people who were financially wiped out by their bubble stock investments.

The same type of tech-driven bubble has formed in 2023-2025, driven by massive Covid-driven monetary and fiscal stimulus money. As a risk-averse investor, I avoided this bubble. I bought a ladder of bonds while their yields are at multi-decade highs. As these ladder rungs mature I have to decide whether to roll them into other bonds or buy stocks.

Is it time to buy stocks yet?

https://www.wsj.com/finance/stocks/how-to-tell-if-the-market-selloff-has-hit-bottom-fd140645?mod=hp_lead_pos4

How to Tell if the Market Selloff Has Hit Bottom

It doesn’t quite feel like it’s time to buy just yet. But here are three tests to help you decide.

By James Mackintosh, The Wall Street Journal, March 14, 2025

[big snip]…

It doesn’t quite feel like it’s time to buy just yet. But here are three tests to help you decide:

Sentiment has already turned sour among private investors…Among institutional investors, however, there’s not enough sign of panic to make me want to go back in… I like to buy when fear drives stocks too low, but this is not that moment…

Leverage adds to the overshoots, as hedge funds and day traders borrow to buy stock, or have to sell to pay back their borrowing. At major market lows, leveraged traders are forced to close trades to repay debt. This accelerates the drop—and helps find the bottom…The small fall in leverage alone isn’t enough to make me think that a rebound in stocks popular with hedge funds, such as Big Tech, is imminent…

Overshooting fundamentals is another sign we’ve hit a major low… [end quote]

The Cyclically Adjusted PE Ratio (CAPE Ratio) is a fundamental that shows that the SPX is in a historic bubble. The tiny retreat from the current small correction has hardly made a dent.

This historical chart shows what happened to the stock market after the comparable bubbles burst in 1929 and 2000. (2009 and 2020 aren’t comparable because they weren’t stock market bubbles.) The bottom took 2 years of losses.

Debit Balances in Customers’ Securities Margin Accounts were at a record high in January 2025. The SPX is far from a bottom.

We are far from the point where I would feel comfortable buying stocks.
Wendy

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Here is a fourth one, learn to read charts. The visual clue is very helpful. You can only tell tops and bottoms after the fact

The Captain

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You can also use the IBD follow through day to tell you when to start buying stocks. But it is not always accurate. So you would need to stay nimble. There are many ways to invest and everyone has to figure out for themselves how to do it. I would say you are a Value investor Wendy so maybe you take your que from Warren Buffet.

https://www.investors.com/how-to-invest/investors-corner/what-is-a-follow-through-day/

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If you’ve held off this long you can wait longer. My two cents.

Today’s prices may only take you back to where prices were a year ago. But then, you may think this correction is an opportunity. I don’t know.

Either think the economy is still strong, despite the current madness and it’ll correct, or wait for the madness effects to really hit and capitulation. Then, it’s either a great buying opportunity or you want to stock up on matches, old silver dimes, shotgun shells, and booze. And have an up to date passport.

But I know nuttin’.

My few shekels are still in, afraid of the drop ahead but not confident it will occur. And I have a few stuffed in the mattress.

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This is what I’m seeing but Monday is likely a down day…

One month chart
tsla pltr arm nvda upst smci

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Wait a week? Why not?

The Captain

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When I looked at this chart, a thought struck me. When it reached its recent nadir in the early 80s, it obviously was a strong “buy” signal. However, the thought that struck me was that at the same time, you could have bought 30-year treasury bonds at 13+% and earn a guaranteed 13+% with almost zero risk for 30 YEARS! No worrying about recessions, stock prices, volatility, etc, just a plain old fixed 13+% “forever” (well, 30 years worth).

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The Shiller Ratio is what I call a “Magic Number” which might be a guide but it does not substitute for smart thinking.

Index 1984 Low Start End Rate
S&P 500 Jul 24, 1984 5,638.94 147.82 9.37%
NASDAQ Jul 25, 1984 17,754.09 225.3 11.34%
@MarkR 13+%

The Captain

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The BofA client flow is showing the private investors have not turned sour, rather they continue their buys…

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Absolutely useless metric for finding short-term bottom. Even otherwise this metric is showing SPY in bubble from 2008… That is you missed a greatest bull market. How could that measurement is?

10 year is not a major period, but in an expanding earnings, you are going to have current multiple higher than a decade average.

There are other better indicators for the short-term bottoms.

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IMO, the reason for the current decline in the stock market and the US economy is because the folks in power are not acting in the best interests of America. Tariff wars, declining immigration (both legal and illegal), and a less functional government are and will continue to result in higher prices, worker shortages, reduced domestic spending, and investment uncertainty.

Only need one test: Is the current administration about to be replaced?

That event will be the signal to reenter the market.

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That is true. But… interest on bonds and treasuries do not compound. You simply get the interest in your account and you need to do something with it, and you aren’t going to find guaranteed 30-year 13% places to put it. Over a 30 year time frame the lack of ability to compound is significant.

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Regardless of all the current events the markets need to move 3 to 4 st deviations down.

NYC no long is the center of the financial world with London. Frankfurt is the center of the financial world.

Our equities will trade at discounts. Eventually.

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Schiller warns that PE10 is NOT a timing indicator.

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Of course it isn’t in a fine-grained way. But in an overall way it shows that the market is in a bubble. For caution, not for timing.
Wendy

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I’ll say. It has been above average for 34 years now except for three quarters in late '08 and early '09.

DB2

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