“Today, my long-term view of U.S. equities remains bullish, and U.S. equities could easily be 30-40 percent higher than today’s levels within two to three years. Having said that, for a number of reasons, now does not appear to be a favorable entry point.“~Scott Minerd, Global CIO, Guggenheim Investments, Macro View Commentary (8/8/2013)
When is a good time to invest? It seems like an easy question to answer, doesn’t it? Of course, you invest when “things are doing okay” and “markets are good.” Easy, right? Not really.
What does “markets are good” or “things are doing okay” really mean. For most of us, it means that markets have been going up, and we expect them to continue to go up. Conversely, bad times to invest are usually viewed as times when markets and economies have been going down because of some sort of problem.
This year would certainly qualify as a “markets are good” year, as domestic markets are up double-digit percentages. But does that mean that it’s a good time to invest? Maybe, or maybe not. In fact, the best times to have invested in the last decade have been when things seemed the worst. Those who bought stocks during the last two recession/bear-market periods (2001-2002 and 2008-2009) have most likely achieved far better returns than those who may have bought when “things were good.”
Of course, readers of this brief are probably not timing the market anyways, and that is a good thing. Your own long-term plan should probably trump any market events or environment. Still, it makes sense to consider what is “good” and “bad” from an investing standpoint.
Markets are not “good” everywhere. International markets, especially in the emerging world, are weak and have been for some time. These economies have faced pressures, and their markets have either only gone up a little or have gone down a lot. So, are these bad times to invest in foreign markets? Only the future will tell us for sure, but if the history in our own markets can offer any guide, the answer is probably “No.”
In general, foreign markets are cheaper, and history shows that some of the best times to invest have been when things were cheap. Of course, things were cheap because people were nervous about them due to stresses and past weakness.
We know that your holdings in foreign stocks have been frustrating over the last three years or so. We share your frustration. That said we generally view foreign markets as being relatively cheap. In general, we can no longer say the same for U.S. stocks. They aren’t necessarily expensive, but the great value opportunities we saw in 2009 have long since passed.
Source: Edited remarks of Kane Cotton, CFA, Bellatore Financial, Inc.