This is a clarion call to get out of the U.S. stock market right now and fast! Do not wait any longer when the S&P 500 index is sitting near all-time high near 6,500. If you are sitting on good gains in your portfolio, please consider yourself to be a fortunate soul, count your blessings and move on. Otherwise, you may come to regret it later if you are blindsided by the current state of the market and its allure.
Why? Is there anything good to stick around? Hmm…let me think…none, no reason. There is nothing that I see to stay invested in the market. To give it some benefit of doubt, is there anything on the horizon to stay put? Hmm again…none, I cannot see anything yet as far as the eyes can see.
So, then, what exactly are the reasons to get out of the market? For that we can enumerate multiple factors and we can go on and on, though, we can stick to the most important ones for now such as follows:
- Stock Market Valuation: It is at an unprecedented level
- CAPE ratio (Shiller PE) at 39 – The highest ever outside of the dot com mania. Refer at https://www.multpl.com/shiller-pe
- Buffett indicator (stock market capitalization to GDP) ratio at 209%. Refer at https://www.longtermtrends.net/market-cap-to-gdp-the-buffett-indicator/
- U.S. National Debt & Budget Deficit: Unsustainable Levels of U.S. national debt at $37 trillion and deficit approaching $2 trillion for fiscal year 2025
- Refer debt at: https://fiscaldata.treasury.gov/americas-finance-guide/national-debt/
- Refer deficit at: https://fiscaldata.treasury.gov/americas-finance-guide/national-deficit/
- Further, the trend is only worsening not improving for both critical aspects of the U.S. economy. Unless, the deficit level is brought back to under 3%, the debt and debt service payments will continue to explode to the unsustainable levels
- Budget surplus and an ability to pay off the national debt are only pipedreams unless, the new breed of U.S. politicians come on board who are serious enough to pay off the debt by creating surpluses and execute a realistic plan to pay off the big chunk of debt, let us say in 25 or even 50 years
- Debt and deficit (surplus) go hand-in-hand and cannot be easily decoupled
- The last time U.S. has seen the surplus was 2001, almost 25 years ago. It is no coincidence, rather by design and gross mismanagement by our duly elected politicians to attain such a catastrophic combination of high national debt and budget deficits
- Tariffs: Lethal / Catastrophic effects of ill-devised or rather suicidal tariffs on the U.S. economy for years to come, not just one time and small effect
- Inflation:
- It is only about to worsen, not improve, especially owing to the fact of poorly enacted tariffs to benefit the elite class by striking the deals and enrich themselves at the expense of proletariat. As we all know it well, inflation is a tax on the ordinary people, not on the privileged class
- Stagflation – simultaneous happenstance of slow growth and inflation is a much higher probability event now than otherwise such as depression or high growth outcomes with low inflation. ‘Goldilocks’ economy is a thing of the past – from 1990’s thru 2010’s, indeed owing to low interest rates, primarily manipulated by the Federal Reserve aided by new industrial revolution via one of the most powerful inventions such as Internet
- Interest Rates Trend: U.S. has seen the long-term trend of declining interest rates for last 4 decades literally from the double-digit rates to low single digit and even near zero during the COVID time. Now, the time has come to reverse the trend, only to overshoot at some point and eventually the pendulum settling back again near the “normalized” rates as it prevailed in last 100 years near 5 to 8 percent
- Market Psyche / Sentiments:
- Last but not least, the U.S. stock market is operating like a casino, a place for gamblers, not investors equipped with the risk-management tools and techniques and taking calculated risks to get rewarded handsomely for taking the right kind of risks. All exacerbated by crypto market like there is no tomorrow. U.S stock market is a place for gamblers, not investors anymore. Instead, even good risk managers are being punished as the saying goes that the no good deed goes unpunished
- Market psyche of over-complacency and a “New Normal” mentality supported by “It is different this time” and “greater fool” theories that is so pervasive during the times of manias, bubbles and related peaks
- In summary, bad behavior gets rewarded and good behavior gets punished in the stock market. We all know all too well what happens eventually to the spoiled rotten kids when the exact same thing happens with the kids in the family
Overall, U.S. is on the path to the absolute ruins and current lame congress and U.S. President does not seem to help it. In fact, they are on a mission or rather hell bent to ruin it for us all, unfortunately, for the proletariat class in other words. Of course, their intent is to ensure that the ruling class prosper like any other authoritarian or rather dictatorial regime. That is the key distinction we are seeing between the two classes here in America as well, unfortunately, which was inconceivable to many including myself in a country like America. Now, we cannot seem to believe our eyes and what we see.
In summary, the U.S. stock market is akin to a “Runaway” train that is only bound to crash and burn; hence, the advice is to get off the train as fast as you can and with little or no bruising depending on how well your portfolio has performed in recent years.
Can the stock market go even higher from here? You bet…absolutely, it can…just as it has gone on for past several years now to take the CAPE ratio to this unprecedented level, higher and higher, initially on the backs of the low interest rates followed by the over-hype of AI (artificial intelligence) wave (since late 2022) even though AI is for real and another game changer, without a doubt, probably after the world changing inventions of Internet in 90’s and smart phone in late 2000’s.
As for our “once-beautiful” country – the “United States of America – USA”, which unfortunately can easily be labeled now as “Divided States of America – DSA”, there is enough fodder here to think about what is next for the U.S. for the MAGA band, republicans, democrats as well as independents. Hope is slim, quite slim, though, collectively, we can make a difference! I am certainly not a congenital optimistic fellow, though, certainly, a hopeful or cautiously optimistic one for many things in life, unlike our congenital “liar-in-chief” at the most powerful seat in the world or rather shall I say “idiot-in-chief” or “evil-in-chief” instead of truly being a “commander-in-chief” for the most powerful ship in the world which he is leading to sink like a titanic in no time.
As a result, so much hatred is being spewed by both sides of the political isles in America, which was unthinkable just a decade ago, that it can only drown us further, not save us from such a malice and catastrophic outcome, unfortunately. That is not the way to lead a truly successful and happy life. In any case, hatred shall have no place in our hearts for the soul to evolve.
Basically, there are enough negative catalysts out there in the market and economy that at a minimum it shall give us a pause, enable us to reflect and plan accordingly. Is market timing advisable? No, not at all. However, what we are speaking of is a risk-management here, not market timing. Is it a market top? May be it is or may be not and the lunacy may go on further like a musical chair game as it has gone on for last several years as the CAPE ratio continues to march higher and higher, an evidence of a continued lunacy of greater-fool theory market participants.
However, higher and higher the market goes, the probability of a market crash goes up materially just as that probability has gone up significantly in the last two years now…namely since 2023. About 2 years ago, that probability was pretty low and now with the confluence of variety of factors, it is quite plausible and not-so-small probability for the market to crash and burn. Along with that, it can take down many investors with it and ruin many lives for the ordinary folks.
There are couple different types of investors as an example: true investors aka risk managers, traders and speculators. If you belong to the first category then the absolutely wise move is to get out of this crazy and lunatic market. There is no good alternative to that in the stock market except for some small caps. However, then again, the concern is they can go down in sympathy as well. They are not immune to the market crashes along with their big brother brethren.
Then, naturally, the question arises as to what to do next? Oh, well, that is for the next time. Please stay tuned!
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