Entering text into the input field will update the search result below

U.S. Stock Market: Why You Should Move With Caution Despite Upside Potential

Jan. 05, 2022 8:04 AM ETDIA, QQQ, SPY3 Comments
Daniel Schönberger profile picture
Daniel Schönberger


  • Without much doubt, the stock market in the United States is extremely overvalued.
  • However, when looking at the bond market, housing, initial unemployment claims, consumer sentiment or the ISM purchasing manager index, a recession seems not likely in 2022.
  • Nevertheless, we should move with extreme caution - even if stocks should move higher in 2022, a huge crash will occur.

Finanzielle Börse Zahlen und Stadt Lichtreflexion

Nikada/E+ via Getty Images

In December 2019, I published an article in which I argued, that the economy was completely detached from the stock market - especially in the United States. About 2.5 months later, the brutal 5-week crash and recession followed. I am referring to

This article was written by

Daniel Schönberger profile picture
My analysis is focused on high-quality companies, that can outperform the market over the long-run due to a competitive advantage (economic moat) and high levels of defensibility. Focused on European and North American companies, but without constraints regarding market capitalization (from large cap to small cap companies).My academic background is in sociology and I hold a Master’s Degree in Sociology (with main emphasis on organizational and economic sociology) and a Bachelor’s Degree in Sociology and History.I also write about wide economic moats in my Substack: https://stockmarket101.substack.comI also write about investing, economy and similar topics on Medium: https://medium.com/@danielschonberger

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

Comments (3)

thirdcamper profile picture
Exactly right. I do wonder if the rockiness and rotation to value under way right now might mean a selloff happens sooner rather than later, but it also might be a shallow one, with a further leg up prior to a major bear market.
I share your caution and based on what I can see with current conditions, I am expecting at least a 9.90% downdraft in the next several months from current levels of the S&P 500 using 4800 as a reference.

That's only a first stop or checkpoint and it could be much worse if conditions worsen from now, and I am referring to money supply declines, interest rate increases, revenues and profit margins, and parameters of that nature.
Political turmoil, Covid, and international tensions are also factors to assess.

I don't know or have much confidence in what the QQQ (NDX) will do because it has a mind of its own, but I do believe in general it will be under similar pressure and could do even worse.

So, even with the rallies, I am on price alert from here on out.
I'm sure anyone that can pick the right sectors and or categories will soften the blow, and do much better, and even make money, but for the passive investor this is a time to be particularly cautious.
"if you are not careful and think investing in the stock market by using leverage is a great opportunity you might lose everything"

Truer words were never spoken, everyone here who has ever experienced a margin call raise your hand. Back in 2000 I knew a guy who lost every penny in his account PLUS he owed the brokerage $120,000 on top of that.
Disagree with this article? Submit your own. To report a factual error in this article, . Your feedback matters to us!

Related Stocks

SymbolLast Price% Chg
SPDR® Dow Jones Industrial Average ETF Trust
Invesco QQQ Trust ETF
SPDR® S&P 500 ETF Trust

Related Analysis

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.