Holding cash for opportunities

Last night, the US stock market was hit again, with the Dow Jones down 1.7%, the Nasdaq 100 index down 2.6%, and the S&P 500 index down 2%.

Many readers may not have a concept of this, as the US stock market fluctuates; to put it another way:

The Dow Jones has fallen 2.26% year-to-date, retreating 7.7% from its historical peak.

The Nasdaq 100 has fallen 8.24% year-to-date, retreating 13.23% from its historical peak.

The S&P 500 has fallen 5.11% year-to-date, retreating 9.22% from its historical peak.

This round of main upward wave indeed shows quite obvious signs of peaking. As for the extent of the pullback, I judge it to be on the same level as that wave in 2022, which is in the range of 20-30%, so I haven't rushed to catch the bottom; so far, I haven't bought a single share.

Do you remember what I said before? Buying at a 10% drop has its pros and cons, buying at a 20% drop has a higher risk-reward ratio, and buying at a 30% drop guarantees profit without loss. This is not a prediction, but based on historical experience from 80 years of US stock market samples.

At that time, some readers asked whether this time might break historical patterns, rendering all historical samples ineffective. I can't say the possibility is zero, but it is highly unlikely, as some fundamental facts have not changed over the past 80 years. For example, the United States remains the most powerful military country in the world, as well as the largest financial country globally. The US dollar is still the world's number one currency, and these underlying facts will ensure the bottom line for US stock market pullbacks. Once it drops to a certain level, someone will buy, including me.

As for when to start buying, it will likely be after the Nasdaq 100 has retreated more than 20% from its high, the S&P has retreated 15%, and the Dow Jones has retreated 12%. Until then, I will remain patient and hold cash. After all, holding cash in dollars also yields an annualized return of 4%, which already exceeds the returns from A-shares and public bonds.