We are in the middle of 2nd oldest bull-run on record without at least 20 percent correction to S&P 500. But we need to understand the difference in today's world. Everyone is waiting for a correction. But still there is no excess in the market. Most of the stock gains are backed by solid corporate earnings or M&A activities. The banking system is robust and the housing debt is at all time low with home equities at record levels. And above all, there is enough money sitting on sidelines to enter the markets in case of any major correction. This is why I am willing to stick my neck out and say that markets are unlikely to correct more than 10% in near future. We can continue to ride this bull-run for another couple of years till we see excess in the system.
There are multiple factors that one needs to understand. There is a lot of liquidity in the system due to easy money policy of Fed. All that money is chasing yield. Interest rates are still pretty low and there are a lot of funds chasing yield in stock market. Precious metals are stagnant for some time and they are seen as a hedge to inflation rather than yield play. If you are a big pension fund, where are you going to put your money to generate yield.
Real estate is also attracting a lot of funds due to same reasons. I believe the appreciation in real estate is going to continue as well in most of the markets. There may be some odd correction in markets where it has gone up a little too fast. But there is no reason to worry about it. Demand for rentals is still high. There are a lot of markets that can cash flow positive with 20% down rentals. So, one should think hard before calling it a top and selling all his investments. There is still money to be made in today's market as long as you know what you are doing.
