Deepak Shenoy, the founder and CEO of Capitalmind, has cautioned investors about the current stock market movements.
In a post late last night on social media site X (formerly known as Twitter), the market veteran said that anyone who has been an investor for more than five years “knows that many stocks are wildly overvalued”.
This is not a great market to keep harping about valuation. Nearly everyone who’s been around longer than 5 years knows that many stocks are wildly overvalued. But those with decades of experience know that stocks can remain overvalued and get even more so.
It’s time to be…
— Deepak Shenoy (@deepakshenoy) July 12, 2024
Stocks “wildly overvalued,” says Shenoy
“This is not a great market to keep harping about valuation. Nearly everyone who’s been around longer than 5 years knows that many stocks are wildly overvalued. But those with decades of experience know that stocks can remain overvalued and get even more so,” he wrote on July 12.
Speaking to followers, he asked them to “be aware” of the risks and likely fall when it happens. “It’s time to be aware that you’re all riding a tiger. If you’re 10% cash, you’re not in cash. That is 90% invested. And if you’re even in “large-caps” or “defensives”, that will still mean you will fall like crazy when you do; in fact, the “offensives”, i.e. everything other than what you own, could go up another 50% before falling, and end up bottoming out higher than where you end up,” Shenoy cautioned.
“Riding a tiger” comes from the phrase “He who rides a tiger is afraid to dismount””, indicating that investors have embarked on a perilous journey that cannot easily be abandoned. While not immediately dire, it is an emphatic warning from Shenoy that these volatile stock waters need to be tread cautiously.
“Zero predictability, it’s a mad market,” says Shenoy
Shenoy also noted that even for market veterans like himself, the stock movement has “zero predictability”, calling it a “mad market” that will remain so until it is not. His advice? Stay nimble, be aware of the situation and risks, and enjoy it while it lasts.
“There is zero predicting ability on stock movements right now. It’s a mad market and will remain one until….it’s not. The point isn’t to keep warning people that it’s getting too hot. I’ve heard this from last December and we’re up some 30% or more since. It could fall tomorrow, and it could fall 10 months from now. The better thing to warn people is to stay nimble and stop loving your stocks. When markets fall, even the ones that give you the most smiles today might need a harsh goodbye,” he noted.
“But till then, accept all the incoming awesome up moves that you cannot explain. You don’t have to explain everything good that happens to you, and you probably don’t deserve it, but you’re getting it anyway. Happiness doesn’t need entitlement – it just needs the ability to sit back and enjoy it while it lasts,” Shenoy added.