We see high risk in many popular and highly recommended stocks. Opportunities for capital gains are always present in many stocks but far too many “popular” stocks are being recommended by the so called experts at the very high end of their valuation and price ranges. It violates the standby rule to focus on what is undervalued and not what is popular. Many of the best performing stocks are now selling at extremely high valuations. That always ends sadly.
The value of publicly traded U.S. stocks to U.S. Gross Domestic Production is now over 143%. While not a “timing signal,” brutal bear markets have commenced from these valuation levels in 2000 and again in 2008.
Since 2009, S&P 500 companies have shelled out more than $4 trillion ( $4,000,000,000,000) on share buybacks. A share buyback occurs when a company buys its own stock in the market to lend support to its share price. Few people are aware that “Buybacks” are one of the major drivers keeping the stock market and many individual stocks at these high valuation levels.