Economy crash =/= stock market crash?

Type_45

InvesterJones said:

Type_45 said:

Discuss...

Long term trend is upwards (even before QE)? Isn't that the opposite of what you've been saying?

I've never said the long term trend isn't upwards. That's always been the case and we need to sincerely hope it remains so.

renegade1

Does anyone else notice this thread dies when the markets rally? My global equities fund is up 3% today.

GazzaBloom

renegade1 said:

Does anyone else notice this thread dies when the markets rally? My global equities fund is up 3% today.

Yes, but make no mistake, the economic mood is sour and while I don't subscribe to @Type_45 prophecy of complete oblivion I would not be surprised to see another 30% drop in equities from this point. I think we are yet to see the worst effects of inflation and supply chain shortages and the associated impact this will have on businesses, employment and economic growth.

https://www.cnbc.com/2022/06/27/wall-street-layoffs-are-coming-as-deals-boom-turns-to-bust-insiders-say.html

https://www.cnbc.com/2022/06/27/fund-manager-investors-should-learn-from-past-bear-markets.html

I have steeled myself to continue to hoover up increasingly lower cost US index fund units each month regardless.

Nebulous2

GazzaBloom said:

renegade1 said:

Does anyone else notice this thread dies when the markets rally? My global equities fund is up 3% today.

Yes, but make no mistake, the economic mood is sour and while I don't subscribe to @Type_45 prophecy of complete oblivion I would not be surprised to see another 30% drop in equities from this point. I think we are yet to see the worst effects of inflation and supply chain shortages and the associated impact this will have on businesses, employment and economic growth.

https://www.cnbc.com/2022/06/27/wall-street-layoffs-are-coming-as-deals-boom-turns-to-bust-insiders-say.html

https://www.cnbc.com/2022/06/27/fund-manager-investors-should-learn-from-past-bear-markets.html

I have steeled myself to continue to hoover up increasingly lower cost US index fund units each month regardless.

I watched a video clip on Bloomberg yesterday, saying this is a classic bear market rally. They said although a lot of bad news is already priced in, the markets are still expecting profits to remain where they currently are, whereas the commentator expects a substantial drop in company earnings - which they said hadn't been priced in. 

Made sense to me. Consumer resistance either because they cant afford to, or are not willing to afford to, may well mean that companies cannot pass on all their increased costs.  

GazzaBloom

This bear market is a good reminder that a retirement portfolio needs to have some resilience built in. I am still in accumulation so buying cheap equity fund units makes sense but ahead of retirement drawdown I will be looking to build up some cash and perhaps buy into a bonds fund (not sure on that one yet!) to build up a war chest of downside protection for when this happens again in the future.

lozzy1965

renegade1 said:

Does anyone else notice this thread dies when the markets rally? My global equities fund is up 3% today.

It certainly gets bumped to the top for some "Type" of reason every time there is a fall in the markets

Type_45

GazzaBloom said:

renegade1 said:

Does anyone else notice this thread dies when the markets rally? My global equities fund is up 3% today.

Yes, but make no mistake, the economic mood is sour and while I don't subscribe to @Type_45 prophecy of complete oblivion I would not be surprised to see another 30% drop in equities from this point. I think we are yet to see the worst effects of inflation and supply chain shortages and the associated impact this will have on businesses, employment and economic growth.

https://www.cnbc.com/2022/06/27/wall-street-layoffs-are-coming-as-deals-boom-turns-to-bust-insiders-say.html

https://www.cnbc.com/2022/06/27/fund-manager-investors-should-learn-from-past-bear-markets.html

I have steeled myself to continue to hoover up increasingly lower cost US index fund units each month regardless.

Do you expect the Fed to pivot?  And if so what consequences would you expect as a result?

GazzaBloom

Type_45 said:

GazzaBloom said:

renegade1 said:

Does anyone else notice this thread dies when the markets rally? My global equities fund is up 3% today.

Yes, but make no mistake, the economic mood is sour and while I don't subscribe to @Type_45 prophecy of complete oblivion I would not be surprised to see another 30% drop in equities from this point. I think we are yet to see the worst effects of inflation and supply chain shortages and the associated impact this will have on businesses, employment and economic growth.

https://www.cnbc.com/2022/06/27/wall-street-layoffs-are-coming-as-deals-boom-turns-to-bust-insiders-say.html

https://www.cnbc.com/2022/06/27/fund-manager-investors-should-learn-from-past-bear-markets.html

I have steeled myself to continue to hoover up increasingly lower cost US index fund units each month regardless.

Do you expect the Fed to pivot?  And if so what consequences would you expect as a result?

I'm no economist but I could foresee a pause in interest rate rises and maybe a slowdown of QT if it looks like the US is tipping into recession, I would be surprised if we saw a reversal back to QE and bond buying.

InvesterJones

Type_45 said:

GazzaBloom said:

renegade1 said:

Does anyone else notice this thread dies when the markets rally? My global equities fund is up 3% today.

Yes, but make no mistake, the economic mood is sour and while I don't subscribe to @Type_45 prophecy of complete oblivion I would not be surprised to see another 30% drop in equities from this point. I think we are yet to see the worst effects of inflation and supply chain shortages and the associated impact this will have on businesses, employment and economic growth.

https://www.cnbc.com/2022/06/27/wall-street-layoffs-are-coming-as-deals-boom-turns-to-bust-insiders-say.html

https://www.cnbc.com/2022/06/27/fund-manager-investors-should-learn-from-past-bear-markets.html

I have steeled myself to continue to hoover up increasingly lower cost US index fund units each month regardless.

Do you expect the Fed to pivot?  And if so what consequences would you expect as a result?

Can you explain what you mean by pivot in this context? Do you mean start quantitative easing again? Or do you mean reducing interest rates? (Or both?)

I think they'll stop increasing interest rates, and will begin reducing them, as and when inflation is looking better, but I don't think they'll be in a hurry to start quantitative easing unless there is a danger of deflation.

The result of decreasing interest rates should be an improvement in equities generally, but especially growth stocks.

Type_45

The reason for the stock market bounce is that the markets are anticipating a Fed pivot.  They are right to do so, IMO, because I think it happens soon.

The Fed is making a big mistake by tightening as we head into a recession. If it was going to tighten it should have done so before now.  It will realise its mistake before long.

Same applies to the UK.  The BoE is tightening as if it believes it's loose monetary policy is the sole cause of inflation.  It isn't. Global supply chain issues are also to blame. 

The BoE and Fed are therefore only going to choke their own economies by tightening policy.  They won't have an impact on inflation, which is outside of their control for the most part.  

Later this year, when they have choked out the economy and inflation is STILL 9%-10% (or higher) they will realise they have made a policy error and loosen.