At some time, free money has a cost - the end of a bubble

 

The cycle of manias and panics results from procyclical changes in the supply of credit ... Money always seems free in manias.

- Charles Kindleberger, Manias, Panics, and Crashes

Follow the credit cycle for longer-term investing. Tracking credit cannot be traded over short horizons, but you better darn know whether credit is rich or cheap and whether it is changing. The credit train will follow a cycle, so always know when it will stop and whether it will speed up. Money was free until last year. Of course, there was the attempt to raise the price of credit near the end of the Yellen Fed term and the early Powell term to 2.5%, but it was snuffed by politics and the pandemic. 

The last year changed the credit cycle with rates now reaching 5.5%, so any bubbles are set for transition. We have not seen panics, but the bond market last year saw the worst performance in decades. This year may also end of negative.

The current investment problem is not finding where to put your money for upside success, but determining what areas to avoid. At current money market yields, there is value in avoiding risk even with double digit stock returns for the SPX. Currently holding cash is better than holding small cap indices. 

Know the credit cycle and fear when the cycle turns to tightening.