It used to be all about the P/E ratio. I’m thinking 8:1 was the point you wanted to be at or above. Then the FED started their distortion of the market in 2008 to recover from the mortgage backed securities collapse by buying tens of billions in securities every quarter to prop up the market. I’m not sure how much of DOW 38,000 was their doing but they are finally unwinding that position. Now add in catastrophic inflation rates and gas prices and you have a double whammy. It may take 4-7 years for this market to bottom and begin the climb back into the mid 30k range. If you won’t need it before then just keep investing - consider it on sale.
This market is going to grind away most people’s investments. It lures you to think the worse is over because of brief increases (false bottoms). Overall however, we see weekly losses in the shape of a downward sawblade. Stansbury Research and others have been touting a coming 30+% correction for the last year. That suggests the DOW bottom to be below 26,000. We’re over halfway to that predicted mark.
When the bottom finally fleshes itself out, our recovery may resemble that of the decades long Japanese historical recovery. In other words, say goodbye to 10+% annual market returns..
None of this may play out as written, but I trust their research (that’s why I pay for its investment analysis and guidance).
I'm no economist, but I do follow market trends. I think you cannot assume a bottom to the market until inflation comes back down to around the preferred 2% range. If inflation is still out of control, and the feds are hiking interest rates quarterly to try to bring inflation back down, the market will react negatively. Right now I am holding a lot of cash positions waiting to buy back in. I would say end of 2022 or early 2023 is the earliest inflation realistically can come back down to normal rates.
It isn't a terrible time to start adding some positions to your portfolio if you plan to hold for the long term. However, I believe you will see more decline before you start to see the incline, at least over the next 6 to 12 months