As the stock market struggles to make new highs, investors are increasingly complacent despite worrisome developments. Yet, the U.S. stock market itself is looking increasingly shaky. Worrisome signs are also growing around the U.S. housing sector critical to America’s economy and China’s economy, which has been an engine of growth for the global economy. Although the price action of this stock market remains healthy enough to justify holding a substantial amount of stocks in a long-term portfolio, this does not justify complacency or in my view significant stock exposure for investors with shorter-term time horizons, particularly in light of growing bearish signs.
This bull market increasingly looks scary. Setting new record highs and extending deep into 2013 only makes it look more worrisome. It was only a little more than a year ago I recommended investors keep stocks as the largest portion of any long-term investment portfolio. But that advice came with the caveat that market risk would rise in 2013, and indeed I have become increasingly nervous about stocks this year. Although I have yet to declare a market top, and will not call a bear market until important technical levels are broken, I have not hesitated urging taking profits and raising cash levels by selling stocks as this market has set new record highs this year. Pictures can often convey more than words, and in this post I am going to highlight a few notable and scary charts related to the current stock market.