Fearing a Bubble, Millionaire Investors Are Watching These ETFs January 21, 2021
With the S&P 500 climbing back from the February lows of the pandemic last year to score 16% gains by the close of 2020, many investors are now concerned that stocks and index ETFs are due for a pullback.
The S&P 500′s 12-month price-to-earnings ratio is at a premium of 45% to its 20-year average. As a result, the CFRA projects a 2021 earnings increase for the S&P 500 Growth component of the index at 13.3% versus 20.1% for its value group.
Over 150 years of history, the Shiller P/E ratio for the S&P 500 has a mean of 16.8 and a median of 15.8. Currently, the Shiller S&P ratio for the S&P 500 is 34.5, which is more than twice its historic average.
Investors in the sustain phase face new challenges.
Portfolios will likely need greater exposure to ‘risk assets’ such as stocks and higher yielding bonds to meet return objectives, in our view.
We believe understanding and managing those risks is key to finding the right balance between preservation and growth.
Balancing ‘Growth’ and ‘Preservation’ Pre-Retirement
The ten years leading up to retirement, what we call the ‘Sustain Phase’, can be scary with questions such as:
Will I have saved enough to fund my retirement?
How can I mitigate the risk that my savings will see a significant decline just before I retire?
Goddy Egene writes that given the gains being recorded in the equities market, discerning investors could invest in stocks to hedge against the rising inflation rate the hit 15.8 per cent in December 2020
Last week the National Bureau Statistics (NBS) released the consumer price index report, which showed that the headline inflation rose to 15.8 per cent in December 2020. The inflation rate, which was an increase from the 14.9 per cent recorded in November, 2020, was said to be the highest level of headline inflation since December 2017, and the largest increase (98bps) since January 2012.
This rising inflation is a great concern for all stakeholders- consumers, manufacturers and investors among others. For instance, for investors to enjoy positive returns on their investments, that returns must be above the headline inflation of 15.8 per cent. And considering the prevailing economic conditions, it is difficult to come across such investments that will deliver returns above the inf