Stocks have registered an impressive performance over the past five years, with the S&P 500 index more than tripling.
But the party may soon be ending, says Anthony Mirhaydari, founder of Mirhaydari Capital Management. "On a number of measures, just as this bull market has taken the crown of glory, it's looking long in the tooth and vulnerable," he writes in The Fiscal Times
"Investors should start thinking defensively."
So what's the problem? First, this bull market already is the fourth longest in history, Mirhaydari says. Second, the S&P 500 hasn't closed below its five-day moving average for 22 straight sessions. That's the longest streak since the 1990s.
Then, there's valuations, he writes. Robert Shiller's cyclically adjusted price-earnings ratio for the S&P 500 stands at 26.9. That's the fourth highest level in history, trailing only the bubble periods of 1929, 2000, and 2007.
"Finally, it's worth mentioning that the meme that has supported this bull market — the flow of cheap money stimulus from the major central banks — is under threat in a way that hasn't been seen before. The Federal Reserve ended the QE3 bond-buying stimulus in October and is set to start raising short-term rates in 2015.
So what's an investor to do?
"I continue to recommend holding a large allocation of cash to protect against the likely return of stock market volatility as we head into December and the end of the year," Mirhaydari says.
CNBC contributor Ron Insana
isn't so concerned. Many economies overseas are in big trouble, and that makes U.S. stocks an attractive alternative, he writes in a commentary for CNBC.
"The U.S. still has many problems to deal with, but most of the threats to sustained economic growth are coming from our intransigent neighbors," Insana notes.
"No longer is the U.S. simply the best house in a bad neighborhood, it's about the only house worth living in, at the moment," he states.
© 2024 Newsmax Finance. All rights reserved.