These new record highs in the markets seem to be going too far again so I have started to scale back into cash for a better entry point as valuations do not make too much sense to me. Risk does not seem to be properly priced in these markets given the amount of uncertainty across many aspects of the economy and the markets. Despite my record of having horrible timing, I prefer to commit to a still solid “risk free” return on cash for a bit while things play out.
My portfolio outside of traditional markets remains well diversified so I can pay the potential opportunity costs in the short term if I am wrong. Many studies show that the 10 year returns of stocks when valuations are this high are very lackluster and even negative when considering inflation which is a risk so I am hedging with this allocation in the short term. I have enough time in my lifecycle to make the bet at the moment. Time will tell!
