Then and now
From yesterday until today, the markets seem to have developed acute amnesia.
The Dow Jones Industrial Average managed to recover by end of day, and it ended Tuesday slightly in the green.
Yellen's comments are by now a mere side note in financial media. After all, she's not the decision-maker when it comes to setting benchmark rates, merely someone in the know who is stating the obvious. Eventually rates will need to rise.
Federal Reserve Chair Jerome Powell, also known as J-POW, is now in charge, and he remains dovish, ready to support the economy (read: markets) no matter what by keeping interest rates artificially low for as long as he can and continuing to provide QE as much as he can get away with on a monthly basis.
So, to answer today's question, in my humble opinion, the party will continue for as long as the fundamentals stay the same.
Excess capital tends to benefit risk assets, and even though we'll likely see pullbacks along the way, it would be very difficult to imagine a bear market given the current economic backdrop.
However, to me, "when top?" is actually the wrong question entirely.
We could never pretend to predict the timing or scale of any potential blow-off top, so why try?
As investors, we need only look around. Are we in a bull market or a bear market?
If prices are climbing, then we can feel more free to take risky bets, in a diversified and cautious way of course, and even apply some leverage.
Once we're in a bear market, it should become rather apparent. Steady declines day-by-day and week-by-week are a good indication, likely following a shift in the above dynamics.
When that happens, we hunker down. Selling for dollars may not be prudent, but at least consolidating our portfolios, reducing leverage and seeking out the less risky areas of the market would be wise.
It may sound complicated, but it really isn't. Wishing you a pleasant day ahead.
Best regards,