Economy crash =/= stock market crash?

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.

InvesterJones

Type_45 said:

Same applies to the UK.  The BoE is tightening as if it believes it's loose monetary policy is the sole cause of inflation.

That's not what the BoE says:

BoE:

Inflation’s overshoot of the 2% target mainly reflects previous large increases in global energy and other tradable goods prices. The former has been greatly exacerbated by the war in Ukraine, which has also raised significantly the wholesale price of many agricultural commodities. The latter mainly reflects the impact of the pandemic, which shifted demand towards goods but also impaired and disrupted supply chains.

Type_45

InvesterJones said:

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.

A pivot in policy could be as little as pausing tightening, all the way to QE.  It is a ceasing of tightening, which is their stated aim at this point.

And yes, decreasing rates will boost equities, which is the melt up I have been talking about for months.  It will be followed by a massive crash.

Type_45

InvesterJones said:

Type_45 said:

Same applies to the UK.  The BoE is tightening as if it believes it's loose monetary policy is the sole cause of inflation.

That's not what the BoE says:

BoE:

Inflation’s overshoot of the 2% target mainly reflects previous large increases in global energy and other tradable goods prices. The former has been greatly exacerbated by the war in Ukraine, which has also raised significantly the wholesale price of many agricultural commodities. The latter mainly reflects the impact of the pandemic, which shifted demand towards goods but also impaired and disrupted supply chains.

I said the BoE is tightening *AS IF* it believes it.  

InvesterJones

Type_45 said:

InvesterJones said:

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.

A pivot in policy could be as little as pausing tightening, all the way to QE.  It is a ceasing of tightening, which is their stated aim at this point.

Again, what the Fed actually say seems a bit different to what you are saying their aim is - see https://www.federalreserve.gov/aboutthefed/files/the-fed-explained.pdf#page=24

In short, their aim is stable prices (ie inflation target of 2%) and maximum employment.

Prism

Type_45 said:

A pivot in policy could be as little as pausing tightening, all the way to QE.  It is a ceasing of tightening, which is their stated aim at this point.

And yes, decreasing rates will boost equities, which is the melt up I have been talking about for months.  It will be followed by a massive crash.

So if the central banks do manage to help us avoid recession and the general results of that like unemployment, lower taxes, lower company profits and failing companies - why would the equity markets crash? How about the bond markets?

I can see some form of crash if we do go into recession, but inflation and standard of living are not enough on their own.

Type_45

InvesterJones said:

Type_45 said:

InvesterJones said:

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.

A pivot in policy could be as little as pausing tightening, all the way to QE.  It is a ceasing of tightening, which is their stated aim at this point.

Again, what the Fed actually say seems a bit different to what you are saying their aim is - see https://www.federalreserve.gov/aboutthefed/files/the-fed-explained.pdf#page=24

In short, their aim is stable prices (ie inflation target of 2%) and maximum employment.

And how is that going for them?  

And what happened to inflation being "transitory".


I have little interest in what the BoE or Fed say, and I base none of my investment decisions on it either.

Alistair31

Another useful post from Monevator

https://monevator.com/bear-markets/