Time To Buy Stocks?
James Hamilton says that this implies that it is now time to buy stocks. I disagree. While we may see some form of short-term rally soon, that will likely not last. Because as the chart illustrates, during severe economic slumps like the 1930s and the late 1970s and early 1980s, stocks were much cheaper than they are now. Given the fact that I believe the current slump will be somewhere in between the 1930s and the early 1980s in severity, that means that stocks will have to fall a lot more than that before they hit bottom. Once they come closer to the lows of the early 1980s, buying might be a good idea, but not now.
Moreover, once the stock markets turn around, the U.S. stock market is not the place where you want to be. Stocks in Sweden and other European countries are much cheaper than U.S. stocks and will therefore rise a lot more once things starts to turn around.