Up 19% in 2023, Is It Safe to Invest in the S&P 500 Right Now?
Investors love a good market rally for obvious reasons, but could that end up being too much of a good thing?
In the stock market, yes. If investors get ahead of themselves, or ahead of real economic conditions and business fundamentals, by sending the market up too much too fast, it's likely to come tumbling back down. That often becomes a stock market correction, which is exactly what it sounds like. When the value of the market becomes completely out of touch with reality, it could go down even more, morphing into a bear market.
That was the state of the market last year. Valuations had become incredibly inflated with many of them becoming completely out of touch from the real underlying value of many companies, especially unprofitable ones. When economic conditions took a turn for the worse, stocks couldn't carry those valuations, and the market dropped as a result.
Source Fool.com
