Up, Down or Sideways?
Now for a value investor, the state of the market shouldn't matter that much, since we aren't buying the market, we are buying individual stocks. But the overall market does become an issue when underpriced stocks are hard to find. And frankly, I'm not finding much.
Some of the bigger blue chips seem to be trading at an ok PE ratio. It is pretty hard to find easily accessible on-line PE ratio data that goes back before Yahoo finance. And that mostly only goes back to about 1998 or so. (Earlier for a few stocks.) By those metrics, some stocks like JNJ and GE seem to be near the bottom of their PE ratio ranges. But I'm worried that we have gotten so used to very high PE ratios, that only mildly high ones seem like a bargain. I don't think we are in a true bubble like 2000, but stuff still seems pretty expensive (by PE ratio and by dividend yield) compared to long term norms. And buying stuff that is expensive is a good way to underperform. And this is why we get back to the state of the market. I think the small correction of last month was just a taste of what is going to happen. So I think I am going to sit on the sidelines and wait for better prices.