Markets recalibrate constantly to new information. They also recalibrate constantly to changes in the weighted-average risk appetite of market participants. Did something change over the past couple of weeks? Of course, there is always something changing. But what?...
John Cochrane offers a great post for that question. Short answer: nobody knows. It cannot be known.
But what if we're in a bubble? Yeah, about that... Scott Sumner has two recent posts on that topic and more. He suggests we not be so sure about labeling past prices bubbles and lower the status of pessimists (I agree). He also suggests we should not offer explanations for events for which we are ignorant (I agree).
The standard advice is still the best advice:
- Set your asset allocation as appropriate for best achieving your goals and personal constraints.
- Get broad (very broad) diversification . . . cheaply.*
- Go for lunch.
- Check from time to time (not minute to minute) readjusting if needed to more appropriately fit your current goals.
*There are LOTS of investment options out there. The links show just two--albeit, two very good ones for achieving broad, cheap diversification. Also, maybe this.
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