Owing to everyone cocooning during the pandemic, I suspect many of us have watched more movies than usual over the past year or so. One of my personal favourites of the recent past is Get Out, a fantastic 2017 psychological horror (i.e., no ‘monsters’ in the traditional sense) film co-written and directed by Jordan Peele. The challenge for the protagonist is to escape a scenario that seems benign to the outside world, but is, in fact, terrifying.
Without giving too much away, the situation for the protagonist seems normal enough at the start. Then, slowly, things become more obviously unsettling until general discomfort gives way to an unmistakable and truly horrifying reality. Here we are in a market cycle that has become squirm-worthy for a long time already. The challenge for investors is to…. you guessed it… get out.
Throughout my career, I have resisted the temptation to engage in anything that smacks of market timing. There’s no evidence that anyone can do it reliably. With that general bit of personal history out of the way, here’s where I make my break with my own past. I think that, given recent market events and considering well-documented valuations, people should get out of markets. Particularly stock markets. And especially American stock markets.
If you so much as attempt to do this, your advisor will almost certainly try to dissuade you.
If you do this, be advised that you will almost certainly trigger capital gains in taxable accounts.
If you do this, people will likely accuse you of panicking – or something like that. Tune them out.
In short, my considered and respectful opinion is that the risk associated with being long in a market that is so obviously overpriced and overdue for a correction is likely to be hazardous to your wealth. This is not a knee-jerk reaction, nor is it an example of panic. My eyes are clear. My hands are steady. In fact, my sense is that this is a decision that will have life-altering implications for many of us. I have made my peace and am risking my professional reputation on this recommendation. I have thought about it persistently for a long time now. I’ve made my decision. Patiently. Consciously. No panic whatsoever. This blog was written a while back because the decision was made a while back. The only real decision for me was when to post it.