Where we might part ways is in other risk assets. There are areas of the global stock market that — even after this huge rally — are still priced for positive long-term returns. In specific, developed intl value stocks are priced for returns that are slightly under the average stock returns — not great but ok. Emerging value stocks are priced for substantially higher than normal returns.
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So here is where I get confused.
I’m pretty sure I’ve heard you say, Rich, that one shouldn’t try and time the market but should invest for the long term as in decades.
But the above sounds like you’re advocating investing in those areas that, at the present time, give the best chance for above average returns.
Is that not timing the market?[/quote]
No, that is not timing the market!
And also no, the thing above that is not what I am saying. I’ll start with that one. I’m not saying you have to invest for decades. I’m saying that you have to consider that the price for stocks is based on decades’ worth of their expected earnings. So, shorter term changes to that earnings stream should not, in theory, change their fair value all that much. (In practice, of course, it often does, but that’s a whole separate topic). But that’s not the same as saying that an investor necessarily needs to hold them for decades.
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OK. I guess I misinterpreted this statement you made in the Coronavirus / Economy / Stock Market thread:
[quote=Rich Toscano]
Anyway back to the OP: when you buy stocks, you are buying a VERY long-term stream of earnings. Like, decades. This recession looks to be very severe, but it is short term by its very nature (at some point we contain the virus, or everyone has gotten it… this can’t go on for all that long).
So as bad as this recession may be, it’s hard to see it moving the dial all that much on the DECADES worth of earnings that determine what stocks are actually worth.
