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Be aware that: 1) we're likely in a declining/sideways market for at least another year until inflation subsides, possibly longer 2) the Fed has most of the c
by cloudking 4y ago
Be aware that:
1) we're likely in a declining/sideways market for at least another year until inflation subsides, possibly longer
2) the Fed has most of the control over the inflation/deflation levers (on demand side)
3) markets will most likely recover over the long term, historically speaking
The Fed is purposefully reducing their asset holdings and increasing interest rates to slow down demand, which in theory should cool inflation. Once the economy cools enough, they will "flip the switch" back on to supporting markets by reducing interest rates, at which point #3 should begin. Educate yourself on the Fed and their impact on markets.
So if you sell at the lows, you're accepting the losses, can move on and invest again later. If you can afford to hold through this bear market, you may recover some of your losses on a longer timeframe. You can also position your portfolio with some downside protection (e.g long dated put options on indexes, selling covered calls on your stocks etc) to reduce the pain, you don't have to just watch your portfolio decline.
- dev_0 4y agoThis time seems different with China and Russia making political shift
- sicp-enjoyer 4y agoThere is always a reason to think it's different this time.
- tjs8rj 4y agoInvestments doing so well these last 40 years is the unusual part. Vast majority of the gains in the stock market over its history happened from 1977-2007.
- dev_0 4y agoRead Nassim Taleb books. No guarantee that history will repeat itself
- paganel 4y agoThe FTSE 100 is almost at the same level as in 2014, those betting that the S&P 500 will always be different than the rest of the exchanges/indeces might be in for a nasty surprise.
- sicp-enjoyer 4y agoEuropeans have significantly different attitudes and values towards work and the economy, not to mention constraints. It certainly shows what's possible, but I don't think it's a great comparison.
- hanoz 4y ago> The FTSE 100 is almost at the same level as in 2014 The FTSE 100 is currently at almost exactly the same level as it was on New Year's Eve December 1999!
- sicp-enjoyer 4y agoIf that period really was remarkable, I think the outcome of a worse period is just lower expected returns, not the end of the world. Japan is often used as an example. But, if you invested regularly in Japanese stocks over that period of stagnation, I think with dividends its still a fine investment.
- somenameforme 4y agoI'd also add to this point: https://wtfhappenedin1971.com/ https://wtfhappenedin1971.com/ The implied causation : https://en.wikipedia.org/wiki/Bretton_Woods_system https://en.wikipedia.org/wiki/Bretton_Woods_system Bretton Woods was a defacto global* monetary system with other currencies tied to the dollar, and the dollar convertible to gold at a fixed rate. Nixon ended it in 1971, at which point the government was unconstrained by any external forces when determining economic policy. The debt to GDP ratio in 1971 was about 35% and declining. Today it's 122%. Even before COVID it was 105% and rising. If this is not sustainable, then there will be a generation which will simultaneously be the last to benefit and first to suffer for this.
- causi 4y ago1) we're likely in a declining/sideways market for at least another year until inflation subsides Gonna be a lot longer than that, at least as far as inflation goes. Q3 2022 is the median date for retirement of the largest generation, the Boomers. When they retire they take their capital with them. Expect the cost of capital triple for at least the next decade.
- TechnicolorByte 4y agoCan you expand on this? What do you mean when you say that the cost of capital will triple over the next decade?
- prottog 4y agoThey probably mean that prevailing interest rates will triple.
- causi 4y agoThe US population pyramid is no longer a pyramid, and neither are those of most of the rest of the world. Not having to pay to raise a larger generation created a golden age that's lasted thirty years. It's now time to pay the piper. https://i.imgur.com/iUYcuTQ.png https://i.imgur.com/iUYcuTQ.png
- chrchang523 4y agoThis model is not consistent with what we've seen in Japan over the past several decades.
- edgyquant 4y agoMost people will have their capital in accounts the rebalance towards bonds on a yearly basis. They aren’t going to be just pulling a ton of acapital out of the market to live off of
- quintushoratius 4y ago> Q3 2022 is the median date for retirement of the largest generation, the Boomers. Just to nitpick: the largest generation is the millennials, not the boomers. https://www.statista.com/statistics/797321/us-population-by-generation/ https://www.statista.com/statistics/797321/us-population-by-...
- bluquark 4y agoI agree with most of this, but note that stock prices don't track real-world events as closely as you're suggesting. They're based on competing predictions of the future. The market will (or has already) hit bottom when the average prediction starts being less pessimistic, not when inflation actually subsides or the Fed actually lowers rates. The defining feature of bear markets is not direction, but high volatility -- they look like a random walk without a clear upper or lower bound.
- cloudking 4y agoYes predictions are a part of stock prices, but the price ultimately comes from supply and demand. If there are more people that want to buy the stock (demand), than people selling (supply) then the price goes up. In this environment where inflation is everywhere and it costs more to borrow money, demand has come down and will likely not return until the Fed switches their policy stance. At least for US markets.
- ekelsen 4y ago"markets will most likely recover over the long term, historically speaking" tell that to the Nikkei index. At this point you'll have been waiting 40 years for the recovery. https://www.macrotrends.net/2593/nikkei-225-index-historical-chart-data https://www.macrotrends.net/2593/nikkei-225-index-historical...
- kqr 4y agoA different take on the same thing: the best models we have of the risk-free returns of equity markets are unbiased random walks, or martingales. Whatever value the index is at now is the best guess at what value it will be in the future, at least when absolute polynomial loss is the error function.
- mypastself 4y agoDoes this statement hold true when accounting for total returns, including dividends?
- cloudking 4y agoFair point, my comment is centered around the US markets, I should have clarified that.
- postsantum 4y agoSo.. an interpolation based on a sample size of 1
- thevagrant 4y agoIt's down to strategy. If you bought once, all in 1990 and did nothing and waited, then maybe that's a problem.
- UncleMeat 4y agoThis is something of "the exception that proves the rule." Literally everybody brings up this specific index as the example. And further, it saw a ridiculous growth prior to its collapse. A regular investor still made out like a bandit. The only people who got crushed were hypothetical investors who put all of their money in right at the top.