You Will Lose Money With The S&P 500 Index

The is priced for perfection and yes, anything is possible but perfection from an economic or specific service viewpoint never lasted. That is the danger, I hope I am incorrect however …

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You Will Lose Money With The Index

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    1. There is a zero percent chance of returns going forward matching returns since the early 80s.
      There is now less room for interest rate reductions,
      There is now less room for increasing government spending without debt becoming an issue,
      There is now a smaller rate of population growth,
      There is now less room for people to rotate out of international markets and into US stocks without international stocks becoming just too sweet a deal

  1. What do you think will happen once the interest drops meaningfully and all the cash in money market funds comes out? I think I heard the figure of $1.3 trillion. Bonds won’t be an attractive option, a lot of it will go into equities, where do you think it will go, EM, Japan, Europe? If it goes into the S&P and Nasdaq they could easily go up if investors/traders/speculators don’t see an alternative. Your thoughts would be appreciated.

    1. Not many indices are attractive right now. The interest rate dropped has been priced in.

      If the market is at 27x earnings (3.7% yield) and interest rates drop from 5% to 2%, investors are willing to get paid a 1.7% premium (assuming earnings don’t grow) to hold a group of high multiple volitilie investments for the next few decades.

      I don’t think that sounds too attractive. And say interest rates move down and the market rallies… that 3.7% yield could decrease even more after said rally

    2. @@billybillson9831 I hear what you say, so my question still remains, where is all this cash in money markets accounts going to go, you say not the Indices, I don’t think bonds, where!?!

  2. Well, I remember in 2009 the forecast was that US stocks would return 0% for the next 10 years. That aged well.

    1. the fundamentals were different, value investors like me were buying big in 2009 / I had 10 to 15% growth businesses offering 8% dividends / how can that return zero?

    2. It’s interesting looking at comments without any intelligence. Have some context:
      – zero interest rates
      – QE and stimulus
      – TINA
      THEY are what pushed those share prices up – not actual better businesses. Once you’ve done those, you can’t do ‘more’ – debt ceiling reached, can’t do negative interest rates etc. And, in fact, at some stage you have to undo at least part of them. That will be the reverse push down….. The forecasts are actually based on historical data – and they are generally true based on what actually happened in the past.

    3. The difference is that in 2009 the market was trading at financial crisis lows.
      And the forecasts were probably biased by the same crisis, so less reliable.
      Today were are at all time highs.
      After a crash, the recovery will also compound to a 5x return.
      But today, at all time highs, is it reasonable to expect another 5x return in 10 years?

  3. The big problem with GMO’s real return forecast is that they have been expecting high returns in emerging value and low returns in the US for way longer than their horizon of 7 years. They may very well be correct this time, but they have lost a lot of credibility by now…
    And of course it is better to invest differently than the herd… if you are right!

    1. let’s say they are wrong another 7 years and then right one / that is enough for people to lose money

    2. If they were wrong and you stayed out of the market for 7 years, you would lose a lot in opportunity cost @@Value-Investing

    3. @@kth6736 Well 7 up years would more than make up for 1 down year so FOMO in this case wouldn’t be misplaced 🙂

  4. I have heard the same thing one year ago and the S&P closed out the 2023 with a gain of 24%. No one can predict the future.

    1. You will hear it again next year, if anyone shows you a “forecast” of the s and p 500s returns I think you should just stop listening.

  5. This may be a silly question…
    Isn’t it OK for 7yrs of negatives if you don’t plan to retire for 20? Isn’t that the same as 7yrs of buying low? Thanks Sven. Your videos have been consistently excellent. I appreciate your hard work.

    1. If you are a no nothing investor, then the best you can do is just DCA into an index and turn off youtube and never look at the news.

      If you have an edge then 7 years of no returns may be avoided

  6. I recommend watching analysis of Ed Yardeni. He was one of the few contrarians about the upcoming recession in October 2022 and he remains bullish. Let’s see where buying “overvalued” NASDAQ index is gonna lead in the long run. I prefer sticking to the leaders of the economic growth.

  7. Very good video, I personally think that we will see higher price for the next 2 years, BUT there is the end of the real-estate 18.6 years cycle that is coming late 2020s, so I think we will see a big correction in like 2027 ish for several years 🙂

  8. If you look on the last year charts you will see that the 2022 bubble already popped and most of the stocks are already back up or over that level. If central banks are lowering rates this year they will go even heighter

    1. That’s certainly the prevailing view.
      Which leaves tons of room for investors to grow more fearful. A lot of potential sellers out there right now.

    2. Lol 2022 bubble hasn’t popped.

      Index earnings are lower than 2022 but the price is the same in a higher interest rate environment

    1. @@Value-Investing there is a lot of liquidity in the US so it is hard to bet against American exhuberance for stock investing, and the government making efforts to keep that liquidity if growth declines. You don’t find that in the rest of the world. But, like you, I am at least half contrarian, and thinking large growth is over-invested, and international is under-valued and I am slowly growing international and US small cap value stocks.

  9. The dilemma I’m in is within my 401k/HSA/529 Plan — there is no option to invest in anything but about 10 different mutual funds or passive index funds. With my excess disposable income, I buy individual stocks.

    But in those deferred accounts, I choose S&P 500 bc its the lowest fees of the options and my time horizon is 30 years.

    1. 30 years is a long enough time horizon that it’ll probably contain an eventual reversion toward the mean from the S&P, underperforming small and international stocks

  10. I think the “Shiller PE Ratio” is a great tool to show how undervalued or overvalued the S&P is based on average inflation-adjusted earnings.

  11. Thanks for helping out with your advice and strategy Sven, I believe it is an ‘all weather’ type of strategy, it is about looking to create value with the money invested, not just about ‘sterile’ stock price appreciation. They say stock pickers don’t beat the index, but that is not always true. I believe the index is over inflated at the moment, it’s a fat turkey and thanksgiving is getting close. So the only chance we have is doing the hard work and finding those good companies out there

  12. Do the constant changes of companies in the S&P and therefor the changing characteristics of the index (much more asset light) do not lead to a change in the index valuation? Just saying it is because of zero interest and miney printing falls a bit short for my understanding….

  13. Thanks for an honest assessment. It can be difficult to deliver a message of caution when everyone is celebrating at the first good news. We may be seeing some relief from inflation, but other aspects of the economy are worrisome.

  14. I lost over $80k when everything started to tank. Not because I was in an exchange that went belly up. I was just stupid to hold and because that’s what everyone said. I’m still responsible. It just taught me to be a better investor now that I understand more of what could go wrong. It took me over two years of being in the market, I’m really grateful I found one source to recover my money, at least $10k profits weekly. Thanks Charlotte Miller

    1. She is my family’s personal broker and also a personal broker in many families I’m United States, she’s a licensed broker and a FINRA AGENT in United states

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