Correction in progress!

economic

Glen_Clark wrote: »

Withdrawal of QE means rising interest rates. Which is a double whammy for share prices - Not only does money flood out of shares into cash, (Who wants Amazon at 300 times earnings when you can get more in a bank account) but companies have to pay more to borrow, leading to falling profits.

Actually the pe of Amazon is now 200 - they are producing strong earnings. It was 300 before.

Depends on how fast they unwind qe. The fed are for now in control about the pace - they can always slow it down if they see asset prices collapsing. But that!!!8217;s not even the point. You have earnings which are driving shares higher. You have rates higher increasing the discount rate. Which one is more offsetting then the other?

Glen_Clark

economic wrote: »

You have earnings which are driving shares higher.

until that raises the chances of withdrawing QE which drives them lower

economic wrote: »

Depends on how fast they unwind qe.

Exactly.
But how do we know what they will do?
Unless you can hire politicians for inside info like the big investors, all we have to go on is the bullsh*te they spout in public..........

economic

Glen_Clark wrote: »

until that raises the chances of withdrawing QE which drives them lower


Exactly.
But how do we know what they will do?
Unless you can hire politicians for inside info like the big investors, all we have to go on is the bullsh*te they spout in public..........

THats the beauty of it - you’re not meant to know anything for certain. That’s simply how it works. Otherwise it’ll be way too easy to make money.

fun4everyone

I don't think its possible to predict future returns from equities in any way. Anyone that tries to is just making click bait or claiming to be a fortune teller.

IMO the gfc was not even that nasty when you look back on it, due to the speedy recovery. There is not guarantee of a quick recovery after a large crash but people now feel that there is imo. To me the following crash looks like it was worse and it's never talked about

https://en.wikipedia.org/wiki/1973%E2%80%9374_stock_market_crash

75% off the UK market and an eternity to recover....ouch. Imagine that with VLS 100. Funny that they started the year thinking it was going to be a good one....

economic

fun4everyone wrote: »

I don't think its possible to predict future returns from equities in any way. Anyone that tries to is just making click bait or claiming to be a fortune teller.

IMO the gfc was not even that nasty when you look back on it, due to the speedy recovery. There is not guarantee of a quick recovery after a large crash but people now feel that there is imo. To me the following crash looks like it was worse and it's never talked about

https://en.wikipedia.org/wiki/1973%E2%80%9374_stock_market_crash

75% off the UK market and an eternity to recover....ouch. Imagine that with VLS 100. Funny that they started the year thinking it was going to be a good one....

All due to global monetary reform (collapse of bretton woods), which resulted in very high inflation and economic chaos (recession) thus the stock market devaluation.

In the present day all we are talking about is 4 hikes this year instead of 2/3 in the US. long term rates moving higher as well but not drastically/chaotically higher.

I do not see inflation getting out of control at all anytime soon. We still are nowhere close to running at full capacity. Lot of slack left in the economy.

economic

We should actually still be worried about deflation, not inflation.

Audaxer

LHW99 wrote: »

Of course a problem for those in retirement is that they are likely to be wanting to live on the dividend income, hence they won't benefit from being able to reinvest them. Hence why 100% equity may not be the best option in retirement unless you can cut down / stop taking the dividend income during the worst of a major crash.

I agree 100% equities not the best option or necessary as I think best to have some fixed income as well. However I think you could still take dividend income during an equity crash, but it will just take longer to recover. However better still to have a cash buffer so that you can reinvest dividends at times of an equity crash.

Glen_Clark

economic wrote: »

We should actually still be worried about deflation, not inflation.

Has Britain ever had deflation?
For deflation you need a strong currency.
But debt is still growing and imports exceeding exports.
All that leads to a weak currency.
When the pound fell following the Brexit vote, making imports more expensive Britain just borrowed more to pay for them - because we don't make most of the stuff we need.

GT85

Of course, my first foray into investing was transferring a £40k cash ISA into a Vanguard S&S ISA, and putting it into VSL80. The transfer purchased on the eve of this current dip !!!!!!. :rotfl:

Rather than gleefully enjoying my returns, within the first fortnight I've seen a 5% loss. Seeing such minor volatility has been beneficial, as it slightly tests my risk, and I haven't been phased at all. At 32, and not wanting the money for 18-25 years to help my son out at uni/house deposits etc, I'm in for the long game. I've gone out to the library and read Tim Hale's 'Smarter Investing' which has been a great read.

I still have £110k sat in cash, which I plan to invest in a general account before moving it into the ISA with each financial year. I've really had to sit on my hand this weekend to stop myself going all in or even with smaller lump sums in stages. I have a quid pro quo arrangement with a friend, his IFA owes him a good turn and is meeting with me free of charge to give advice. He knows I'm a passive investor (especially after reading that Hale book :rotfl:), so I expect as much impartial advice as possible.

It'd be interesting to read other investors opinions, especially against those of a professional fund manager. So what would you guys do? Go in now adopting the "time in the market" approach, or observe further and attempt the "time the market" angle and take advantage of further downward trends? Or other?

economic

Glen_Clark wrote: »

Has Britain ever had deflation?
For deflation you need a strong currency.
But debt is still growing and imports exceeding exports.
All that leads to a weak currency.
When the pound fell following the Brexit vote, making imports more expensive Britain just borrowed more to pay for them - because we don't make most of the stuff we need.

There are different forms of inflation.

Asset price inflation - asset prices rising which we have seen in the uk with property and stocks. usually a good type of inflation as it makes us richer, but of course depends who you are!

Currency-driven inflation - which we have seen recently withe deval of pound and is normally temporary as currency devals normally reaches a lower equilibrium level and settles down. This is a bad type of inflation.

Demand-driven inflation - which is based on the demand from people and companies for goods and services in the economy. Usually in a strong economy this type of inflation occurs. This is the type central banks are striving to achieve. But we have not had a huge amount of this due to spare capacity in the economy.

Thus from the above i don't see inflationary pressure, more deflationary. Recent inflation pressures seem to be coming from demand led inflation, however its way too early to tell if its sustainable.