Stocks Have More Downside
The S&P 500 is still EXTREMELY expensive
Why Alberta Now newsletter will soon be changing its name to “7 to 8 Figure Investors”
If you missed my previous announcement, you can read it here: https://www.whyalbertanow.ca/p/announcing-why-greenland-now
In one week, we saw the dramatic drop in stocks around the globe.
In the past few weeks, I have been writing a bit on tariffs.
Today, we're going to take a look at the stock market.
Specifically, why I believe stocks have more downside to go.
After reaching all time high with S&P 500 in February, at April 8, the drop brought the index down to 18.9%.
Just a tad before we can call this a "stock market crash".
By definition, a stock market crash is when the market drops by 20% or more.
In the following days, the market recovered by 8.3%.
If the market had "crashed" the next day, it would put this crash as fast as the COVID stock market crash.
The S&P 500 is still EXTREMELY expensive
That's the headline from Global Markets Investor. Recently they shared a table evaluating S&P 500's current valuation against the various metrics.
Credit: https://x.com/GlobalMktObserv/status/1907047797226184704
Despite the sell off, the US stock market is still at an all time high.
Just because the market has dropped, it doesn't mean it's "cheap".
As a matter of fact, we're seeing the gamblers pushing their chips in.
Why not?
The market has rewarded many who bought the dip since COVID.
Long term stock market performance have been rocking it since the great recession.
A super bull market since 2009, what could go wrong?
Say Hello to the Casino
Money has been flowing to the stock market, not just into any stocks, but into some of the most riskiest investment vehicles - Triple leveraged ETFs.
If you're not familiar with Triple leveraged ETFs, just think of them this way:
Any move the stocks make, it goes up or down by 3x.
For example, if the stocks go up by 1%, this type of investment vehicle will go up 3%.
Of course, when the stocks go down by 1%, it also goes down by 3%.
Now, take a look at this chart:
Source: https://www.etf.com/sections/features/despite-big-losses-tqqq-traders-keep-buying-dip
Look at how much capital has been flowing into this leveraged investment.
The green bar represents capital flowing into the investment fund - aka buying.
The red bar showing money coming out of the fund - aka selling.
Is this the sign that the market has crashed and ready for bottom fishing?
Bulls and Bears Make Money, Pigs Get Slaughtered
When I first heard of this saying, I remember carving that into my memory.
It helps to drill that in when I was at once, being a "pig".
You see, every market has its cycles.
Toward the end of every market cycle, we see greed at its finest.
Without fail, this is how I know we are getting closer and closer to the end of this epic / historic bull market.
When there's a dip, we see people rushing in, using some of the most riskiest way to invest - leveraged ETFs for example.
I'm not saying one can't trade this market and make some quick cash.
This is a great time for a trader to make a lot of money.
As a long term investor who focused on valuations and fundamentals, I'm simply not designed or capable to trade in and out of markets all day.
I'm just not built for that.
What I'm good at, is keeping an eye on the bigger picture.
No one wants stocks when the market bottoms
When do I know the market has finally found the bottom?
When no one wants stocks.
They don't want to hear it.
They don't want to talk about it.
They want to lock themselves out of their brokerage account to not see the damage done to their investments.
How do I know?
I was once that pig who got too greedy towards the end.
You wonder why I became a long term, conservative, investor?
Once bitten, twice shy.
Good news is:
To anyone who has the patience and willing to take their time and do it right, the rewards are waiting ahead.
I haven't invested in stocks for many years.
I'm looking forward to great opportunities popping up on the horizon.
For now, I focus on investing in assets that aren't overly leveraged nor popular in the mainstream.
If you like my work, I invite you to share it with others.
Eric Chang
Calgary, Alberta
April 15, 2025
Copyright © 2025 Why Alberta Now.
No part of this publication may be reproduced, distributed, or transmitted in any form or by any means, including photocopying, recording, or other electronic or mechanical methods, without the prior written permission of the publisher, except in the case of brief quotations embodied in critical reviews and certain other noncommercial uses permitted by copyright law.
The information provided herein is believed to be accurate and reliable, but Why Alberta Now does not guarantee its accuracy or completeness. The content is for informational purposes only and is not intended to be a substitute for professional financial advice. Why Alberta Now is not a financial advisor and does not provide personalized financial advice. The views and opinions expressed in this publication are those of the author and do not necessarily reflect the official policy or position of Why Alberta Now. The content may be subject to change without notice and may become outdated over time. Why Alberta Now is under no obligation to update or revise any information presented herein.
Investments involve risks, and individuals should consult with a qualified financial advisor before making any investment decisions. Prospective investors should carefully consider the investment objectives, risks, charges, and expenses of any investment before investing.