investorsIt appears investors – retail and institutional – have become rather like predators. They patiently stalk shares, waiting for a dip, and then they strike – buying stocks when prices fall.

Consider last week. Barron’s described it like this: “The Dow traded down nearly 80 points on Monday, 170 points on Tuesday, and 170 points on Wednesday, but each time the blue-chip benchmark finished off its lows. That was followed by the Dow’s 187-point rally on Thursday, as everyone bought the dips.”

Investors’ remarkable behavior led the publication to speculate, “What if higher volatility, instead of scaring investors away from the stock market, brings them in? In that case, this bull market could still have a long way to go.”

Buying low and selling high is a foundational principle of investing. However, it remains to be seen how successful buying dips will prove to be in a market that some believe is too highly valued.

One measure of valuation is the 12-month trailing price-to-earnings (P/E) ratio, which tracks a company’s current share price against its earnings during the previous 12 months. Last week, FactSet reported the trailing P/E ratio for the Standard & Poor’s 500 Index was 22. The five-year average is 18.2, and the 10-year average is 16.9. Some prefer to look at forward P/E ratios, which compare share price to expected future earnings. The forward P/E ratio for the Standard & Poor’s 500 Index was 18, while the five-year average is 15.7, and the 10-year average is 14.1.

Only time will tell whether investors’ dip buying will more closely resemble the hunts of tigers or those of African wild dogs. When hunting prey, tigers are successful 5 to 10 percent of the time. African wild dogs take down prey 85 percent of the time, according to BBC’s Discover Wildlife.

As always, much will depend on the investments selected.

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* These are the general views of Jonathan DeYoe and they should not be construed as investment advice for any individual.

* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.

* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.

* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.

* All indices referenced are unmanaged. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.

* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.

* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.

* Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.

* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.

* The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.

* The original “Weekly Commentary” was prepared by Peak Advisor Alliance. Jonathan DeYoe is a member of Peak Advisor Alliance and adds, subtracts and edits before publishing.

* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.

* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.

* Past performance does not guarantee future results. Investing involves risk, including loss of principal.

* You cannot invest directly in an index.

* Consult your financial professional before making any investment decision.

* Stock investing involves risk including loss of principal.

* “Are investors more like tigers or African wild dogs?”

Sources:

https://www.forbes.com/sites/shoptalk/2017/01/09/going-straight-to-the-source-todays-thriving-d2c-brands-threaten-monopolistic-industries/#50ca99415190
https://www.economist.com/news/business/21731429-direct-consumer-revolution-bedroom-and-bathroom-new-class-startup-upending (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/11-20-17_TheEconomist-A_New_Class_of_Startup_is_Upending_Americas_Consumer-Goods_Industry-Footnote_5.pdf)
https://www.dollarshaveclub.com
https://www.brainyquote.com/quotes/krista_tippett_561841

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