Are the markets staying irrational longer than I can comprehend or....

eskbanker

eastcorkram said:

If, sorry, when, there is a crash, would money market funds be effected too?

Not directly, but it would depend on exactly how they're managed - there are plenty of short term MMFs that track rates such as SONIA, so don't follow equity markets as such, but market crashes may have wider consequential impacts on the economy, interest rates, etc.

Hoenir

There's interesting commentary as to why the higher interest rates in the US are having little effect / not the impact that was forecast. Exiting QE was always an unknown path. Really throw the cat amongst the pidgeons if the Federal Reserve were forced to raise them further at a later date. 

Cus

Hoenir said:

cloud_dog said:

eskbanker said:

But surely 4% over two weeks isn't particularly significant?

Maybe I've lost perspective?

Stock markets are not the real economy.  Markets reflect companies' future earnings, not just present earnings but also those well into the future. Whether they'll be realised or not who knows. 

30% if the stock market is passive index investment allegedly. None of those 'investors' care about future earnings nor care about drops as they are just told to continue to invest as per YouTube etc and that noone can beat the market, and all will be ok over many years because the past performance says so ( although we are always told not to rely on that) Self fulfilling prophesy. Different dynamic to the markets now, and it could all end in tears but it's a new world.

redpete

Alexland said:

Just be disciplined enough not to mentally bank all the gains for now and run a diversified portfolio to wealth preserve some of the upside in less volatile assets which for now are also offering good return prospects.

That's what I'm doing. Just swapped a bunch of equity funds into direct-buy gilts (on ii platform) that I'll hold to maturity to fund most of the draw-down payments for the next two years; 4+% yield is good enough for me.

Altior

Pat38493 said:

cfw1994 said:

cloud_dog said:

...am I just no longer able to comprehend relative value any more?

I appreciate they might be getting excited with the lower inflation numbers recently and the hopes of forging ahead rate cuts, and we will have the numpty back in the Whitehouse which is only likely to fuel business / stock markets, but it all feels a little lacking in substance perhaps?

My simple global equity fund is up almost 4% in a little over 2 weeks.

I have to say I agree with you….but markets are fickle things 🤷‍♂️

My pot, despite zero going in and a little being withdrawn, has gone up over 26% in the past 12 months.  Similar to you since the start of the year 💪
Feels a little crazy, doesn’t it 😜

That suggests to me I should shift a chunk out, maybe to a money market fund (or similar)….but I haven’t taken the steps to do it 🫣

Yet 🤪

My gut feel is also that, regardless of any political views here, TheMarkets™ might like what the new President may do 👀
To start, at least…..which is essentially what is holding me from ‘locking in’ (& leaving to wither against inflation!) those gains 🧐

Where did I put my crystal ball down?  I’m sure it is here somewhere 🤣

The problem is that each time in the past there was a market crash due to a bubble or suchlike, for quite some time before that, you could find various experts saying that the market was overvalued and there will be a crash.  However on some occasions it carried on going up for years until the inevitable crash finally happened.  

I think some wag once said “Experts have predicted 10 out of the last 2 market crashes”.

There's reasonably passive (pardon the pun) ways to gauge valuations. Judged on past history, those indicators are very bullish in the US (which obviously dictates passive global funds). CAPE being a well known indicator. Even the basic S&P EPS chart below is quite scary imo!

However, what can't be predicted with certainty is what will be the trigger for a correction, how deep it will be, how long it will last, will valuations get much higher in the meantime etc.

michaels

Based on the 'fundamentals' we would all have sold a while go and be 20% or more worse off now 'on paper'.

Using history as a guide the win is to stay invested through the booms and busts.

Scarum

Zero growth between 2001 to 2013 focuses the mind!

saucer

michaels said:

Based on the 'fundamentals' we would all have sold a while go and be 20% or more worse off now 'on paper'.

Using history as a guide the win is to stay invested through the booms and busts.

I’ve been keeping a big chunk of investments in MMFs over the past year. I’ve therefore lost out on gains over the past year, but it’s been steady inflation beating growth, and is certainly less anxiety provoking. If anything I might shift more in this direction.

dont_use_vistaprint

Do markets become more resilient to crashes & rebalancing over time? Is there any data to that  as we go forward in time crashes become less frequent and less impact?

I was looking back at what happened during Covid and wondering if something similar happened again. I imagine the impact  on markets would be far less.

We’ve had the heightened threats of Russia and China hanging around for a while . Nothing has come of that yet. Trump seems to bring a stabilising  effect to things, TikTok is back up! What are the kinds of triggers we should be looking for that would cause a crash to begin. What can we learn from the past? 

Am i right assuming people are expecting about a 20% loss in the S&P500 sometime in the next year or two? And maybe three to five years to recover?  And that it’s mostly due to the overvaluation of Mag7

cloud_dog

I don't think crashes / corrections become less frequent or impactful.  At a simplistic level these events usually relate to a percentage, which (obviously) just means a larger number for the crash/correction, but a similar relative size for the  crash/correction (accepting that there are no 'standard' crash / corrections).