a. If the market only goes onwards and upwards from here, then this debt-laden, 2020 massive recession/depression only caused an extremely short, 23 trading day fall (Feb 19 - Mar 23), which risk takers have to be thrilled with.
or
b. If the market tops out soon, and falls 40%, 50%, 60%, etc from the Feb 19th peak, then we cannot complain we never had a wonderful second chance to divest if this turns out to be just a fantastic bear market rally.
The S&P 500 (2,941) is down less than 9% in 2020 and made more than a 60% retracement of its top to bottom fall.
If you believe the stock market is a reflection of the economy.
Boeing (which already was having major problem not related to the pandemic) just announced they are laying off 16,000.
Also, consumers are not spending (except on groceries,) Since our economy is so consumer spending driven - that does not bode well at all for our economy.
I think our local economy is holding its own. H is still getting new jobs. He deals with all sorts of water/wastewater/environmental construction stuff, both new and “fix it.” When the economy really tanked in 2008 we really saw it. I’ve been expecting it with this one, but so far? Nada - other than maybe a few days when it was first going on. It’s picking up more lately too.
We’re not in an opening up state for the most part, but we are in an area that is less hit by the virus. It’s already a popular area for commuters to MD toward DC. I wonder if we’re becoming more popular for those who want to flee cities?
Right now I had planned to sell some of our stocks if they reached positive territories again. They have and I’m holding them. I have no idea if that’s a good guess or not TBH.
“If the market tops out soon, and falls 40%, 50%, 60%, etc from the Feb 19th peak, then we cannot complain we never had a wonderful second chance to divest if this turns out to be just a fantastic bear market rally.”
Funny, I said the same to hubby. But he isn’t selling, said we have too much cash as is, normally he would most of them in stock.
“If you believe the stock market is a reflection of the economy.”
Stock market isn’t a reflection of the economy, not the way it looks right now. How can we have unemployment rate of 20% (will be more) and the stock hasn’t tanked and stay tanked yet, is beyond me.
The “market” went down and now has come back up… but if you look at individual stocks, the disparity is pretty wild. Some stocks like Amazon and Walmart are higher now than they were before the Covid decline started; in other words they are making new highs. Meanwhile some REITs (that I own) are still 60% off their highs, and oil stocks are still well of their highs.
Perhaps no surprise… with much of retail closed (or people afraid to shop in-person even when stores are open), order-for-delivery like Amazon (and Walmart’s web operation) and retail stores that sell groceries like Walmart are still in operation and getting increased business. Oil stocks are presumably following oil prices down as lack of driving cars greatly reduces consumption.
Every economic cycle is different e.g. negative oil prices in this cycle. That said, it may be helpful to compare this cycle to past cycles when the Federal Reserve was extremely dovish.
Three most recent Recessions:
2000 Internet Bubble burst
2007 Mortgage Bubble burst
2020 Everything Bubble burst
S&P 500 Index peak to trough fall
1. -50% Nasdaq fell 78%
2. -56%
3. -34% or stock market hasn’t bottomed
Currently 16% below its peak
Duration peak to trough
931 days (> 30 months)
650 days (> 21 months)
3. 34 days (1 month) or stock market hasn’t bottomed
Duration of recovery from trough to the old peak
1. 1,694 days (> 55 months) Nasdaq took more than 12 years to recover
2. 1,481 days (> 48 months)
3. 41 days (1 month) and counting or stock market hasn’t bottomed
Ok, so what’s your prediction?. You seem to suggest that things will get much worse before it gets much better and will take years to ultimately recover?
The S&P 500 was 2,854 on May 1, 2019. On May 1, 2020 it was 2,830.
Last year, we were debating if there was going to be 2% or 3% GDP growth, and unemployment was at a historic low. This year we are facing a severe contraction that will last multiple quarters and unemployment is at a historic high. While there are are differing opinions as to how long it will take to recover, the level of uncertainty about the virus itself and the economy is extremely high.
It makes no sense that the stock indexes are at essentially the same level as they were one year ago. I would be surprised if the market doesn’t fall further, probably lower than the recent lows.
I think it’s going to stay volatile with bigger than what used to be normal swings until we start seeing the results of the opening up experiment - then people will decide.
And no one really knows which way that experiment will end at this point.
I am quoting the actual U.S. regulatory disclaimer that funds must use. I think “Past performance is not necessarily indicative of future results.” is a good disclaimer. Past performance can definitely be indicative of future results, but not necessarily. Basically, it is a twist on two wonderful quotes.
“History doesn’t repeat itself, but it often rhymes.” - attributed to Mark Twain
“Those who cannot remember the past are condemned to repeat it.” - George Santayana
@bloomfield88, if those saltwater economists were wrong, Japan would be experiencing hyperinflation by now. Look at their debt/GDP ratio. Instead they have experienced disinflation and deflation (in large part due to demographics).
I’ve learned the hard way not to let ideology guide my investment decisions. Buy low, sell high. Buy cheap, sell dear. But only around the edges. For the most part, diversify to a balanced portfolio and mostly buy and hold.
BTW, the whole first world will eventually turn Japanese. Europe first, then the US decades later.