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To put it into perspective, the last time the market behaved like (multiple drops of this magnitude) this was 90 years ago, in 1929, and it was at the start of
by mgolawala 7y ago
To put it into perspective, the last time the market behaved like (multiple drops of this magnitude) this was 90 years ago, in 1929, and it was at the start of the Great Depression. Today was the second largest percentage drop for US Markets in history.
Now is not a good time to sell your stock holdings (at least not anymore). This smells of a panic right now.
I think a severe recession is all but guaranteed at this point. Let's hope we get through this with no more than that.
- badfrog 7y agoIf you think recession is guaranteed, why not sell?
- deleted 7y ago[deleted]
- Ensorceled 7y agoIf this drop is related to a panic sell off, then it's deeper drop than it needs to be. If you sell now, you might be selling in a panic low and locking in your losses. If. Make your own decisions.
- hitpointdrew 7y agoThat is opposite of what you should do. You would just be locking in losses (or greatly reduced profits). As long as you are reasonably sure you can hold your stocks for a few years then just hold on to them. Or better yet, go on buying spree and get cheap stocks.
- badfrog 7y agoMy read of "I think a severe recession is all but guaranteed" was that OP thinks prices will continue to fall. Am I misinterpreting?
- mgolawala 7y agoFirst, there is always the possibility that I could be wrong. The markets could hover around these levels and fall no further. Second, I may not know when to buy back in. Do I back in after they have fallen 10%? How about 20%? Should I wait till 25%? What if it goes down another 3% and then starts to head backup.. and then back down again above these levels before falling another 30%? What you are suggesting is market timing. I am not very good at it, and I don't think most people are. You not only have to know when to sell, but you have to know when to buy back in. You have to get it right twice.
- hitpointdrew 7y ago> Do I back in after they have fallen 10%? How about 20%? Should I wait till 25%? You should not try to time the market. And hopefully you don't really mean "buy back in" (meaning your panicked and sold, you should just be adding/averaging down). Just look for general buying opportunities and don't kick yourself if the market falls a bit further before it rebounds.
- usaar333 7y agoPerhaps. A 30% spy drop is already in predicting recession territory (https://www.investopedia.com/a-history-of-bear-markets-4582652 https://www.investopedia.com/a-history-of-bear-markets-45826...). Even if I was 100% confident there would be a recession, it's still not clear the markets are not undervalued at this point.
- Kerrick 7y agoThe textbook definition of a recession may mean that prices will continue to fall until the recession ends -- in fact, as soon as prices rise it ends the recession. But by that definition, the "great recession" ended in the USA in June 2009. I'm guessing the above poster meant something more like "period of society-wide economic hardship" by recession. By that more colloquial definition, you might say the great recession lasted through 2014. The stock price plummet, however, was largely finished for most of that period of hardship. I have no crystal ball; I can't tell you where we are going to be. But if the above poster meant "We're past the plummet, all that's left is the slow climb back to normalcy" then their comment makes more sense.
- bobbylarrybobby 7y agoIf you think prices will fall, sell now and then buy back in after they’ve fallen
- SheinhardtWigCo 7y agoOr hold and hedge by buying UVXY et al
- submeta 7y agoUVXY?
- gruez 7y agohttps://www.proshares.com/funds/uvxy.html https://www.proshares.com/funds/uvxy.html
- deleted 7y ago[deleted]
- deleted 7y ago[deleted]
- trophycase 7y agoDo not buy and hold leveraged ETFs interday. Buy puts if you want.
- coliveira 7y agoI don't think anyone should go to the market trying to "buy the dip" in this situation. If you have cash, keep it. In a market that is dropping, 0% gain (cash) is a fantastic investment.
- rolltiide 7y agoThe whole debate is about being too married to stocks and ignoring the wide wide universe of markets and asset classes. To anyone else, recognize that the citizenry is not limited to being passively investing in stocks, yet many of them are when they shouldn't be. People in all the other markets say "buy the dip" arbitrarily too, and many of those markets are often inversely correlated to the stock market. So just repeating what your favorite investment guru once said does not give you any more insight than the next person.
- zone411 7y agoThat's true but what's also true is that we found out in 2008 that there is much more correlation between asset classes than you might think.
- rolltiide 7y ago2008 was a liquidity crisis and credit crunch so everything got margin called across asset classes, what’s great about 2020 is that hasn’t happened, yet. Great meaning the fireworks have yet to go off.
- zone411 7y agoRegardless of whether it happened or not, my point is still true. I made a chart for you with domestic stocks, emerging market stocks, gold, bonds, Bitcoin, treasuries and real estate: https://ibb.co/1LnG5Dv https://ibb.co/1LnG5Dv. They all fell.
- mschaef 7y ago> As long as you are reasonably sure you can hold your stocks for a few years then just hold on to them. What's 'a few years' mean to you? The Nikkei hit its high of 40K around 1989-89 and hasn't traded above 80% of that in the 30 years since.
- prewett 7y agoYou could take the absolute worst case scenario if you want, I guess, but every other peak in the history of world markets has come back faster than that... Besides, that's not even fair. Why are you assuming the parent is talking about holding stocks bought at the peak? The kind of people that hold their stocks for years tend to be the kind of people who don't buy at a peak. Long-termers tend to be more of the Buffett persuasion; he has said that he wouldn't care if the market completely closed for 10 years, because he buys businesses that grow in good times and bad, and he collects dividends in good times and bad. All the while the employees of the companies are spending their efforts in making his stock more valuable.
- akhilcacharya 7y agoIsn’t that misleading given the price of the Yen?
- pradn 7y agoThat doesn't include dividends paid out by the companies in the NIKKEI.
- minwcnt5 7y agoEven with dividends reinvested the Nikkei's return over the past 30 years is negative.
- imcoconut 7y agoTheir population demographics are different from ours. We will continue to provide workers and consumers over the coming decades - economy-wide demand will return once the crononavirus threat subsides.
- 7y ago
- tomc1985 7y agoI did that with the first dip and now I'm like 10-20% underwater. Kinda pissed that I'm going to have to hold these for a while just to break even Sure loss harvesting is nice but those credits still represent money lost, and said loss far exceeds any taxes on gains I'll be making for a while
- seanmcdirmid 7y agoSo about 2008? Placing this crash is difficult and will only be clear in hindsight.
- treis 7y ago2008 was one sector of the economy dragging down everyone else. Shutting down everything for weeks to months is going to wreck everything. There's not a pause button. It's an emergency stop that's going to take a long time to recover from.
- pyrrhotech 7y agoYour first two paragraphs are severe contradictions. If this is anything like 1929, the bottom will be around 340, after retesting highs from 1987. In that case, 2400 SPX is a bargain sell and still getting out near the top in the scheme of things. Even if this is only a relatively mild recession like 2000 or 1973, we'll be seeing 1600 - 1700 SPX or at least 30% below today's close.
- coliveira 7y agoGoldman Sachs already said they expect a further drop of 20%. Of course, this is just the beginning.
- xwdv 7y agoOthers have already forecast a drop of at least 60%. 20% is definitely only the beginning.
- koheripbal 7y agoTwo points. 1. Today's drop is sort of misleading because it followed an irrational (IMO) low volume rally on Friday. We're still roughly flat from last week. 2. A recession is pretty much what we're ASKING for in order to stop the virus. People need to stay away from one another. So if it's not online, the business should be closed. 3. (bonus point) Unlike systemic recessions (like 2008), this one is purely externally driven (like 2001) - which means it's temporary. Whether we deploy a vaccine, deploy anti-virals, flatten the curve, or just suffer, it'll still be over in a maximum of 18 months. Since stocks are valued by their 20 year forward earnings, the market is very much oversold. (the exception being for companies that is going to go bankrupt in the next year due to cash flow issues - and receive no bailout).
- mgolawala 7y agoI agree with both of your three points. (ha!) It was why I stated that it felt like a panic. The problem is panics are much like stampedes, they can take on a life of their own once they get started.
- VikingCoder 7y agoWhy do you presume there won't be another external or systemic recession in the next 18 months? You can't just assert it's temporary. You can say, "The causes of this downturn are temporary." We have no idea what the market will do in the future. We have strong evidence it will recover, but that's not the same thing.
- JoshTko 7y agoThe problem is that the externally driven factor can cause systemic issues. Having 25% retail & restaurant sales for a year will wipe out savings for a significant portion of the world. Most people will be fearful of spending for a long, long while.
- hkmurakami 7y agoThis is particularly acute since the American economy derives a big part of its drive from consumer spending, unlike other economies that may be more producer or infrastructure driven.
- Reedx 7y agoMaybe, but why don't you think the markets will bounce back once we're on the other side of this? Have underlying fundamentals changed longer term? South Korea, China, Singapore are encouraging and seeing a return back to (almost) normal life. Granted, we're not dealing with this nearly as effectively and there may be a 2nd wave to come. But at this point they seem to make the case for optimism.
- seanmcdirmid 7y agoA lot of ventures that were hanging on by threads will be ruined by this, so the pandemic is likely to clear out a lot of the weaker businesses as any good recession or crash is apt to. It will take a while for the marker to grow around that loss (though good in the long term, there is pain in the short). It could also trigger a housing correction, which has ripple effects on the construction industry, and those people are no longer eating at restaurants, and so on. Think of busts being inevitable anyways, and a crisis is merely the way into one.
- adamc 7y ago"apt to" -- presented in the hopes it is useful.
- alasdair_ 7y ago>"apt to" -- presented in the hopes it is useful. "apt get" -- automatically update your Debian machine.
- jdhn 7y ago>It could also trigger a housing correction What would a housing correction look like? Demand still outstrip supply in hot markets, so the worst thing that'll happen is that the housing prices will have a slight dip, and that's it. Also, with the Fed lowering interest rates to zero and possibly lower, that'll continue to inflate the value of assets such as houses.
- 7y ago
- tinyhouse 7y agoNo one knows. You have the entire world working (mostly together) on ending this. I'm optimistic things will get much better in a month or so.
- noads 7y agoWhat? We just had our national day of prayer, that seems to be the main response. How on earth can you be optimistic in the face of all available evidence? What are you basing this month timeframe on, did you just completely invent that number out of thin air?
- jghn 7y agoIf one assumes that the market was a powder keg waiting for a spark to explode, it doesn’t matter when the virus part of the equation clears up
- bryanrasmussen 7y agoI'm hoping for post-pandemic exuberance to lead us out of the economic problems.
- rootusrootus 7y agoIf we hit pre-virus peak any time in 2020, I'm selling it all and buying gold. * * I kid, I kid. Mostly...
- deleted 7y ago[deleted]
- edgefield0 7y agoMaybe in a year or two. In a month or so, covid will still be ramping up in various parts of the world.
- fuckknows 7y agoThis is going to take much longer than that to play out.
- Nuzzerino 7y ago> Now is not a good time to sell your stock holdings (at least not anymore). This smells of a panic right now. I'd love to make large buys of stocks at a time like this, but I have no idea whether my job/company/industry is safe. Last time I was laid off from work was particularly rough for me, and I'm only just now getting back on my feet. The uncertainty of the situation is probably making many others think twice before buying/spending so that's going to make it harder for stock prices to recover in the short term.
- AQuantized 7y agoNobody can tell you what will happen for sure, but it might be a good idea to look for businesses with large market caps and capital stores to deploy that will make it much more likely they will survive this period.
- zilian 7y agoSo, just buy large-caps ETF ?
- rupert1234 7y agoIn 08/09 the market felt this bad, and ended up worse. S&P went from 1576 to 666 iirc. That's almost 60% down. We are only about 30% down now.
- gentle 7y agoYou're absolutely right and this is what most of the "buy the dip" idiots don't understand.
- lancewiggs 7y agoThe S&P500, the best general index, closed at 2386 today. It's risen over 300% since the last crash, the GFC in 2007. It's been an extraordinarily lengthy bull run, and well overdue fo a crash. Before the GFC the index was 1550, and after it was ~760 (~50% drop) At the peak of the dotcom boom it was generally under 1500. In 2002 after that crash it was 800. (45% drop) The recent peak was ~3380. A 50% drop is ~1700, which is almost 30% below where we ended today. The question to ask yourself is how does this collapse compare to the dotcom collapse and the GFC? The dotcom collapse affected internet businesses and was contagious (sorry) from there. The GFC start with banks and finance and was contagious from there. This starts with pretty much every industry, and has immediate impacts on supply and demand. It's going to be very ugly.
- chrischattin 7y ago9/11 happened during the dotcom crash, which likely had a much greater effect on the economy as a whole.
- _bxg1 7y agoThe thing with dotcom and GFC is that they both revealed fundamental problems in the marketplace. Dotcom was over-hype around internet startups, GFC was the financial house of cards around subprime mortgages. There was no "going back to the way things were" in those cases. In this case, on the other hand, the primary mechanism is "people can't work/aren't going out and buying things". That's absolutely going to "go back to the way things were", in some sense. It's just a question of how long it will take, and how much damage will be dealt in the meantime. But it feels very different from those other ones, which could be good or bad. Put differently, the GFC was like organ failure: things couldn't just heal, they had to be reworked and replaced. The current crisis is like a knife wound: the basic problem will heal on its own, but in the meantime you have to keep from bleeding out and hopefully avoid necrosis.
- qooleot 7y agoAre you sure COVID-19 didn't partially prick a systemic issue that was hard to see on the rise (as many also missed the housing crisis before the fall)? For example, the amount the stock rise was attributed to stock buybacks in an unsustainable manner caused by late stage government policies (tax cuts, low rates). There has been some pretty extreme levels of corporate debt that correlates with this.
- pmiller2 7y agoI don't plan on selling, but if things don't get better in a couple weeks, I'll be doing some tax loss harvesting by selling some VT and VTI and buying VOO or the equivalent.
- m3kw9 7y agoIs not bad to sell, the problem with most people selling is they won’t get back in till things go way up, trying to time the bottom and missing the run waiting for it to come back angry that they missed the gains.
- kradroy 7y agoI have never thought about all-out selling during this. In fact I'm buying more with each dip. I feel that securities are a bargain right now. With select selling I'll also be taking advantage of tax loss harvesting for years to come.
- iMuzz 7y agoBe weary of catching falling knives. I've made that mistake before.
- deanmoriarty 7y agoWhy, exactly? If you have a healthy emergency fund in cash to cover your liabilities for 6 months (or even 1 year to be more conservative in this environment), what is the problem in throwing every bit of cash that comes your way (paycheck savings, ...) and you won't need for a few years, at the stock market as it goes down? Over decades the stock market has had an IRR or 8%+, and that IRR includes crashes like these.
- gbrits 7y ago“and that IRR includes crashes like these.” No it doesn’t.
- deanmoriarty 7y agoCould you please substantiate your claims? This is what I mean and what I do, by always allocating the same amount of savings per year, in good or bad times [1]. You can see how in 2008 such portfolio had a drawdown of more than -50%. Despite that, it performed well above the 8% IRR I mentioned. Another interesting data point, by investing lump sums of money at the very peak of every market cycle, immediately followed by a massive crash [2]. I believe the IRR in this case is still above 7%, which is absolutely phenomenal considering the horrible investing timing. If you don't agree, please tell me exactly why I am wrong and why you are right, so I might learn something. I come to HN to read HN-quality comments, not Reddit-quality content. Thank you. [1] https://www.portfoliovisualizer.com/backtest-asset-class-allocation?s=y&mode=1&timePeriod=4&startYear=1972&firstMonth=1&endYear=2020&lastMonth=12&calendarAligned=true&initialAmount=1000&annualOperation=1&annualAdjustment=1000&inflationAdjusted=true&annualPercentage=0.0&frequency=4&rebalanceType=1&absoluteDeviation=5.0&relativeDeviation=25.0&portfolioNames=false&portfolioName1=Portfolio+1&portfolioName2=Portfolio+2&portfolioName3=Portfolio+3&asset1=TotalStockMarket&allocation1_1=100 https://www.portfoliovisualizer.com/backtest-asset-class-all... [2] https://awealthofcommonsense.com/2014/02/worlds-worst-market-timer/ https://awealthofcommonsense.com/2014/02/worlds-worst-market...
- taurath 7y ago> This smells of a panic right now. It is a panic, but its justifiable to panic over the entire economy being shut down for an undetermined amount of time. No person on earth can say when this will end, given what we currently know about the virus, whether its possible to become reinfected, and how effective our strategies will be.
- neuronic 7y agoEverything happening right now are delay strategies to get a vaccine / antiviral treatment. Before we can control this the economy will be shut down. Nothing will be like before, the financial stress in the global economy is too extreme.
- ineedasername 7y ago>I think a severe recession is all but guaranteed at this point Recession yes, severe, maybe not. (thought I admit the possibility) I think if the current distancing measures curtail the spread, then by July (maybe sooner) things could begin to inch back upwards. Then it's a matter of how much the next flu season impacts things, but by that time we should also be within 6-8 months or so of a vaccine. Recession for the next 1.5 years is definitely in the cards, but this is a unique circumstance with a unique, specific cause. If that cause is removed, a return to normalcy shouldn't be so far behind that a recession is "severe".
- jader201 7y agoYou’re assuming things will return to “normal” after things start improving. Businesses, big and small, are going to take a huge hit from this that will take a long time to recover from. Probably more than most (all?) of is have seen in our lifetime. Seems like this is something we’ve never faced before, and it’s not that highly unlikely that we’ll see some pretty nasty and long-term impacts from this.
- tjs8rj 7y agoWhy? This demand contraction is sector specific and largely due to a temporary shock. Tons of companies are doing fine, and local, state, and fed have programs to stop-gap a lot of these issues (interest-free loans, tax cuts, loan freezes, QE, etc). Why do you think these aren't enough for the next 2 months or so?
- ineedasername 7y agoI think it will really depend on how long the hit lasts and, at least in the US, how much the government does to help keep businesses afloat in the meantime. If most businesses can come out of this in bad shape but intact, then things might pick up quickly. However I think that depends almost entirely on how well "social distancing" etc reduces the spread of the virus. If it works well and reduces outbreaks to a minimum, it's in the realm of "manageable" economically, though even then, as you point out, it's a "not in our lifetime" event. If the virus isn't well contained though, then we're probably looking at the timeframe for a vaccine as the minimum time before things can start their long trail upwards again.
- agumonkey 7y agobut history never repeats perfectly we can already observe this on the health side, there was quite a good amount of monitoring and collaboration (too late and too little) but nothing compared to 100 years ago pandemic for instance we have a bit more tools to work with and a bit more knowledge. hopefully (hopefully) we can flatten the dip too :)
- Sukotto 7y agoOne edge case to consider. If you have stocks in a pre-tax retirement account like a traditional IRA in the US (or RRSP in Canada?), now could be a good time to sell them, move the money into a post-tax account like a ROTH IRA (or TFSA?), then buy the equivalent number of stocks there. You will pay reduced taxes because the value of the stocks is relatively low, then pay no tax when you finally withdraw from the ROTH. (All else being equal and imho, the market is likely to recover over time) That is, if you don't mind the risk that the market might massively rebound in the middle of the transaction. There are a bunch of assumptions here. Do your own research and don't blindly believe a stranger on the Internet. Make sure you understand the taxes, fees, penalties, or whatever you will have to pay.
- aantix 7y agoYou’d have to be sitting on a cash savings equal to the value of the retirement account? Because you couldn’t use the proceeds from the retirement sale?
- rafiki6 7y agoLike you rightly said, this is a gamble. You're playing against volatility we haven't seen in almost 40 years. Look at VIX. You would likely burn yourself, especially as an amateur. If you want to play this game, there is room for put options in your portfolio to counter some of the bleeding.
- kazinator 7y ago> Now is not a good time to sell your stock holdings. But that's exactly what a good many fools are doing, which explains the downward price pressure. > I think a severe recession is all but guaranteed at this point. Let's hope we get through this with no more than that. I suspect it's going to be remembered as a redistribution of wealth from hotter heads to cooler heads.
- deleted 7y ago[deleted]
- unabridged 7y agoI think its just pure fear selling off way too much. The stock market only appeared to be on a huge bull run, the amount of money in the system doubled since 2008: https://fred.stlouisfed.org/series/MABMM301USM189S https://fred.stlouisfed.org/series/MABMM301USM189S Since 2008 money means something different. The fed will keep releasing liquid funds for banks to buy up all the cheap stock. Or the US government might even give away money to keep consumer spending going. Either way it will expand the money supply enough until the SP500 goes back to 3000 even if 3000 equals 1500 in 2019 money.
- tjs8rj 7y agoExcept a stock market crash and a recession are two different things. Beyond temporary contraction in demand, and supply line disruption in China, the US still has solid fundamentals and I see no reason why things wouldn't just pick up again in a few months. Do you have reason to believe otherwise?