So, when is the right time to invest in our current environment?

Almost three months ago the market reached a point (only to be known in hindsight) of maximum downside momentum.   Since that point in time we’ve gradually moved higher, those investors with the steadiest of nerves who were willing to reject the potential for European economic collapse have been paid the biggest rewards since risk of this collapse have eased.

Next are the investors who believe that the current recession fears are exaggerated, which is more or less where I am as an investment advisor.  Our purchases have been made after the European collapse fears have eased yet before thoughts of a slow growth economy and no recession have become commonplace.

But if you want even more certainty, then I really have no answers for you other than you will likely be buying near a market top.   You will be buying when prices are even higher and reward is even less.  If you want perfection aka no risk, no potential for Euro default or US recession then expect to buy at the top.  This will be when investor confidence is at an extreme and good investors will be selling or cutting back positions.

I believe the S&P 500 has the potential to run another 7% to 10% or back to the highs of last summer.  At 1400 on the SP500 would still only be 13 times 2012 earnings of $105 (the current estimate is $108).  As a benchmark the 50 year average for the SP 500 is 15 times current year earnings, hence equities are pretty cheap right now.

Investors must learn to balance the need for return and the compatible degree of risk and eliminate the “I’ll invest when the world is not quite so insane.”  Waiting for no-risk is a sure fire way to find yourself near a market top when the next issue for markets to contend with arises.  And, there always is a new issue.