Is Now A Good Time to Invest?

Is now a good time to rebalance your portfolio? Or invest cash sitting on the sidelines? 

 

During the second half of 2024, we shared that:

 

* Equities/stocks were significantly overvalued based on price-to-earnings ratios being above one standard deviation of their historical average

* We didn't know when, but historically, when equities are overvalued by this much, we see corrections of 20% to 30%. This is referred to as the melt-up before the melt-down. 

* Tariffs could be the catalyst that sparks the correction 

 

 

Of course, we can't time the markets. We don't know the future of tariff policies or what global trade will look like. We don't know if we are at or near the bottom. Certainly, we could see more downside volatility. A few of the key data points that we consider: 

 

*  Valuations are getting closer to their historical average and are within one standard deviation.

* From its high point to its low point, the S&P 500 dropped 19%, and the Nasdaq dropped 25%

* Consumer confidence is near all-time lows, which historically have produced better than average returns over the next 12 months 

* Some of the best days in the markets occur shortly after the worst