Institutional Investors Just Sent a Historic $8.3 Billion Warning to Wall Street -- but Are Investors Paying Attention?
The previous five instances since January 1871 in which the Shiller P/E exceeded 30 were eventually followed by declines of at least 20% in the Dow, S&P 500, and/or Nasdaq Composite.
What's more, the Federal Reserve is historically divided. The Federal Open Market Committee (FOMC) -- the 12-person body, including the Fed chair, responsible for setting the nation's monetary policy -- has had dissents in opposite directions in two of the last three meetings.
Patience is a virtue (and moneymaker) on Wall Street
Based solely on institutional investors' actions, sizable drawdowns are expected in the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite. But this doesn't mean investors should head for the hills.
Aside from the reality that Wall Street professionals aren't always right, stock market downturns tend to be short-lived. Analysts at Bespoke Investment Group found that the average S&P 500 bear market decline (20% or greater) lasted just 286 calendar days, or about 9.5 months, over the last 96 years.
In comparison, the typical S&P 500 bull market since the start of the Great Depression in September 1929 has endured for 1,011 calendar days, or roughly two years and nine months.
This notable disparity between bull and bear markets demonstrates the power of patience on Wall Street. For long-term-minded investors, every meaningful downturn represents a buying opportunity.
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Bank of America is an advertising partner of Motley Fool Money. Sean Williams has positions in Bank of America. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
Institutional Investors Just Sent a Historic $8.3 Billion Warning to Wall Street -- but Are Investors Paying Attention? was originally published by The Motley Fool
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