“The pattern is as ancient as tulip bulbs and as predictable as lemmings running to the sea,” said Ashburn. “Just as stocks begin to push comfortably into over-valued territory, individual investors are allowing greed and regret to overcome caution and satisfaction.”
Ashburn says the Federal Reserve is responsible for a market, which is taking on the characteristics of a bubble that is destined to pop.
“The Fed’s decision to push bond yields down was designed to give investors strong incentives to buy anything anywhere that they believe will provide better returns,” said Ashburn. “This can help get the ‘animal spirits’ moving again and help kick up economic activity. But it’s a sucker’s play, just as it has always been. When you buy stocks at a normalized P/E in the low 20’s, history has not been kind to you. The sole exception was the late 90’s when stocks went from overvalued to extremely overvalued, and investors were happy…for a while.”
Given the above scenario, Ashburn recommends “underweighting equities for all investors of all stripes.”
About Creekside Partners
Creekside Partners, based in Lafayette, Calif., works with families to protect and grow their life savings. The firm values its independence in that it is not affiliated with any bank, brokerage firm or insurance company. Creekside does not sell any commissioned investment products, and is not bound by any proprietary investment offerings.
For more information, visit Creekside Partners at www.creeksidepartners.com.