Bubble vs. Rational Growth? Strategies to Against Hesitation

The $S&P 500(.SPX)$ has hit new closing highs 15 times so far this year and has posted four consecutive months of gains. The $S&P 500(.SPX)$ index up nearly 42% from its October 2022 lows.

In the bullish market, many investors are optimistic about the future, but others are worried that the best buying opportunity has passed.

Bubble vs. Rational Growth

There is an increasing concern and divergence among Wall Street professional investors.

Marko Kolanovic, Chief Market Strategist at J.P. Morgan: Bubble is Gradually Inflating

He believes that the significant rebound in the U.S. stock market and Bitcoin's rapid surge past the $60,000 mark are signals that the foam is gradually inflating. These developments suggest that foam is accumulating in the market—when asset prices rise at unsustainable rates, foam tends to appear.

Analysts such as David Kostin, Chief U.S. Equity Strategist at Goldman Sachs, do not acknowledge the existence of foam.

He believes that the emergence of risk appetite in the market is rational. Although large tech companies are highly valued, this high valuation is supported by fundamentals. As the fourth-quarter earnings season draws to a close, the financial performance of various U.S. companies also confirms the rationality of the stock price increases. Data shows that earnings per share for U.S. companies in the fourth quarter of last year increased by 59% year-on-year, significantly exceeding the expected 47%."

But let's face it, no one can predict the stock market. We don't know what's going to happen in the next few weeks or months.

But one thing's for sure: the most valuable asset in investing in US stocks is time, and hesitation is the biggest risk.

A safer investment strategy

It sounds reasonable and wise to buy low and sell high. For example, if you had invested in the S&P 500 index at its October 2022 lows, you would have enjoyed handsome returns by now. But that's hindsight, and timing the market or trying to buy at the bottom can be a dangerous game.

We can't overestimate our abilities or underestimate the complexity of the market. Remember 2022? When many experts were warning of an impending economic recession, did you have the confidence and judgment to know that the next bull market was just around the corner?

The stock market could go down next, or it could continue to surge. You could regret buying or not buying. But if you choose not to buy, you might miss out on the upside potential.

So for most investors, dollar-cost averaging /Auto invest is a safer investment strategy. You might buy at a high point, but you might also buy at a low point. As long as the long-term bull market trend remains unchanged, a market downturn is actually an opportunity to lower your average cost of holding stocks.

In other words, never try to guess the perfect timing for investing. Give your money as much time as possible to grow. Even if the market falls after you buy, as long as you continue to invest, you can still earn decent returns in the long run.