8 ms·

Recession canceled? U.S. stock market 'frothy' after S&P 500's strong first half

71 points by MilnerRoute 3y ago

deleted 3y ago
[deleted]
raincom 3y ago
Time to hike interest rates at least by 200 basis points or more.
Dwedit 3y ago
[flagged]
JimtheCoder 3y ago
The S&P 500 is not a solid indicator of overall economic strength, and can reverse very quickly... Change my mind?
- alexb_ 3y ago
  If you're so confident that it will reverse, why not put your money where your mouth is?
  - JimtheCoder 3y ago
    I didn't say it will reverse quickly, I said it can reverse quickly. There is a difference.
    - alexb_ 3y ago
      Right, but people who are confident enough to put money on the line believe that it won't.
      - ChuckNorris89 3y ago
        Because their alternative is letting their money be eaten by inflation
- MilnerRoute 3y ago
  From the article: "Economic data released in the past week showed a revised estimate for U.S. growth in the first quarter was higher than anticipated; new orders for manufactured durable goods were stronger than expected in May; sales of newly built homes that same month beat economists’ forecasts; consumer confidence jumped in June to a 17-month high based on a Conference Board survey; and that initial jobless claims in the week ending June 24 fell... U.S. inflation measured by the personal-consumption-expenditures price index softened to 3.8% in May on a 12-month basis, the slowest increase since April 2021, based on a government report Friday." Also, the "recession canceled" remark wasn't based on the S&P. It's from the chief global economist at Economic Outlook Group LLC -- a quote from the analysis he sent to investors Thursday. (He followed his "recession canceled" remark by citing the larger economy's "impressive performance the first three months," and drops in "virtually every inflation metric.")
skywhopper 3y ago
All the talk of a recession last year was always just bluster to justify layoffs and other anti-worker policies and actions. Anytime there’s that much unanimity in the press about the economic outlook whether it’s a coordinated move or just groupthink, you know it’s not going to happen.
- berkle4455 3y ago
  Do you think the yield inversion was also a coordinated effort?
  - douglasisshiny 3y ago
    The yield curve inversion has predicted the last 9 out of the 5 recessions. Could it also be that the two-year yield is higher (than the 10-year yield) because people expect the fed to lower the FFR after a couple of years after inflation has reached their target?
    - berkle4455 3y ago
      > The yield curve inversion has predicted the last 9 out of the 5 recessions. This is a weak argument and the evidence does not support it: https://fred.stlouisfed.org/series/T10Y2Y https://fred.stlouisfed.org/series/T10Y2Y
      - douglasisshiny 3y ago
        Its suggesting that a inverted yield curve alone is as good as a coin toss as far as leading indicators go.
        berkle4455 3y ago
        It has a 100% success rate based on my observation. And if we're going to disagree on facts, I'm not sure the point in having any sort of further discussion.
- 3y ago
talldatethrow 3y ago
More proof the dollar is worth less than ever.
rocauc 3y ago
While I welcome optimism, it’s premature to declare strong top line S&P 500 performance as the end of economic uncertainty. Tech is the only sector with significant YTD gains: Brent Crude Oil, Regional Banks, Transportation, and Retail are all down YTD. In the S&P 500, the “Magnificent 7” stocks (NVIDIA, Apple, Google, Microsoft, Meta, Tesla, and Amazon) are responsible for *85%* of YTD gains. Coatue’s East Meets West macro view from June 30 is the source for the above, and it contains a number of great insights: https://www.coatue.com/blog/company-update/coatues-2023-emw-conference https://www.coatue.com/blog/company-update/coatues-2023-emw-...
- whatshisface 3y ago
  One of those things is not like the other - crude oil is a commodity, and it going down is a good thing (In addition to the Fed's current policy being "raise interest rates until prices stop rising," high energy prices are VERY bad.) That is not really an objection to your point overall, though.
  - rocauc 3y ago
    Good call out. Edit - FWIW, energy sector stocks are also down YTD (certainly correlated with lower prices of an inelastic product). I also realized the linked sourced from Coatue hasn’t been on HN and is a good source for independent discussion like this. Submitted: https://news.ycombinator.com/item?id=36565261 https://news.ycombinator.com/item?id=36565261
  - alkibiades 3y ago
    it’s usually not a good thing cuz it’s indicative of demand being down which usually means the economy is weak
  - everybodyknows 3y ago
    > crude oil is a commodity, and it going down is a good thing Unless you happen to believe that climate change is real, and market-based pressure is useful in its mitigation.
scottLobster 3y ago
Right, because the market has never behaved irrationally. We've got student loan payments resuming soon, a steady stream of commercial real estate mortgages that are refinancing at higher rates for the next year or two, a population who's wages are still on average lower than they were pre-pandemic after adjusting for inflation, supply chain whip-saws as supply/demand continues to over/undershoot in some sectors, the federal reserve saying another couple of hikes are in order this year, and the boomers continuing to age into mass-retirement. You want to dollar cost average into the market fine, but I wouldn't take out any margin loans for at least the next year.
- voisin 3y ago
  It isn’t irrational if the concerns you’ve mentioned makes the market think the fed will have to drop interest rates again sooner rather than later. At this point the market is essentially a drug addict that just got a shot of Narcan and rather than atone for its sins, has gotten excited that it’s going to live long enough to get at least one more hit. There’s no discipline, no long term, fundamental thinking. Everyone is (and has been for a few decades) just another ape from r/WallStreetBets, even if he or she is wearing a suit and goes to work in a fancy office tower.
  - scottLobster 3y ago
    Oh yeah, but the market's been predicting the fed will be "forced" to drop interest rates for about a year now, base solely on the taper tantrum from several years ago. Hasn't happened yet. What the market seems to be conveniently ignoring is that a world where the Fed allows itself to be "forced" into lowering rates to near-zero again is a world where the Fed largely ceases to be relevant. So the Fed is, IMO, going to keep rates at least where they are if not higher if for no other reason than self-preservation. They'll have to see complete market capitulation before they'll consider lowering again. Besides, one of their mandates is price stability. If they lower rates again, guess what happens? More inflation, and then they have to raise rates again because Congress certainly isn't capable of doing anything about it.
- temende 3y ago
H8crilA 3y ago
[flagged]
gjvc 3y ago
always remember, "the market is not the economy"
DueDilligence 3y ago
[dead]
mupuff1234 3y ago
Is there an estimate of how much the US stock market is actually based on the US economy? Most of the listed companies are global after all.
no_wizard 3y ago
Anyone have any idea what one of the better index funds is to invest in? Doing some research and trying to follow the general Buffett Rule as it were and I can’t seem to determine what is legitimately going to track the S&P 500 and what claims to but actually doesn’t
- pknomad 3y ago
  I invest in VTSAX and VOO (the latter tracks S&P500). I prefer Vanguard because it's a private company that is not beholden to shareholders. (disclaimer: I don't own any equity or work for Vanguard).
  - platyp 3y ago
    If you invest in Vanguard funds, you are a Vanguard shareholder.
- quags 3y ago
  The simplest is following the Bogle three fund method VTSAX / VTIAX and VBTLX from vanguard that have a low fee split to your liking. I weight towards us stocks and very little in bonds. If you just did this over the last few years you portfolio would be up now , might have been down last October but over all doing ok. I auto invest in these and then go into single stocks I think are under valued. The books by Peter Lynch were easy and fun reads about investing although you can also get the main points watching a few of his videos on cspan for good information on trading that’s relevant today.
  - kuchenbecker 3y ago
    Don't discount bonds, foreign stock, and commodities. Diversified portfolio including bonds is closest thing known to a free lunch.
- freetime2 3y ago
  Either VOO or IVV (ETFs that track the S&P 500 Index) would make a great choice to buy and hold. Both are managed by reputable companies, have $300B+ in assets under management, and have low expense ratios of 0.03%.
ramesh31 3y ago
Other than RSUs, I'm 100% bonds for the last year, and no desire to bother with it. Yeah I'm probably missing out. Or maybe not. My brain just can't handle caring about it anymore.
thefounder 3y ago
I guess now it's the time to double down the bets. The more "liquidity" you provide the more the stonks go up again!
quags 3y ago
This Peter Lynch talk https://www.youtube.com/watch?v=rf_f8GV0yYM https://www.youtube.com/watch?v=rf_f8GV0yYM is one of the best videos on the stock market I have seen. It’s from the 90s and is relevant today. I like how it goes into how there is always something to worry about like a recession , the difficultly of predicting the market and how even with one of the most successful funds from the 80s every time the market went down his fund went down.
deleted 3y ago
[deleted]
ok123456 3y ago
If there's anything we've learned in the past 20-some years: the stock market has very little to do with the health of the overall economy. Stock prices are the measure, and the measure is manipulated.
lchengify 3y ago
> Sonders said she sees the U.S. as having experienced “rolling” recessions in different segments – such as housing or manufacturing – as opposed to the entire economy being swept up in a full-blown downturn. “The recession versus no recession debate” is missing the current nuances of this cycle, in her view. If we reach 2025 and there's no 2000 style recession, this is the most likely cause. The recession is happening industry-by-industry and at different speeds. Some are sharp and fast (commodities), some are slow (commercial real estate), some happened early (tech), some happened late or haven't even happened yet (hospitality). It also makes sense from a first principles standpoint: If everyone saw it coming due to covid, different industries will react differently, but every industry would definitely act. The difference between now vs '08 and 2000 is information availability, both from the obviousness of the catalyzing event and how ubiquitous financial information has become in the past 15 years. Even as recently as 2008 it was considerably harder to find and act on economic data vs today. Most companies of any size can discover and act on economic data based on how they see fit. Given this, it's not shocking that tech acted first given they have immediate pricing effects and have information-driven cultures. Compare that to CRE where contracts span decades, and pricing is opaque by design.

71 points by MilnerRoute 3y ago

deleted 3y ago

[deleted]

raincom 3y ago

Time to hike interest rates at least by 200 basis points or more.

Dwedit 3y ago

[flagged]

JimtheCoder 3y ago

The S&P 500 is not a solid indicator of overall economic strength, and can reverse very quickly... Change my mind?

alexb_ 3y ago
If you're so confident that it will reverse, why not put your money where your mouth is?
- JimtheCoder 3y ago
  I didn't say it will reverse quickly, I said it can reverse quickly. There is a difference.
  - alexb_ 3y ago
    Right, but people who are confident enough to put money on the line believe that it won't.
    - ChuckNorris89 3y ago
      Because their alternative is letting their money be eaten by inflation
MilnerRoute 3y ago
From the article: "Economic data released in the past week showed a revised estimate for U.S. growth in the first quarter was higher than anticipated; new orders for manufactured durable goods were stronger than expected in May; sales of newly built homes that same month beat economists’ forecasts; consumer confidence jumped in June to a 17-month high based on a Conference Board survey; and that initial jobless claims in the week ending June 24 fell... U.S. inflation measured by the personal-consumption-expenditures price index softened to 3.8% in May on a 12-month basis, the slowest increase since April 2021, based on a government report Friday." Also, the "recession canceled" remark wasn't based on the S&P. It's from the chief global economist at Economic Outlook Group LLC -- a quote from the analysis he sent to investors Thursday. (He followed his "recession canceled" remark by citing the larger economy's "impressive performance the first three months," and drops in "virtually every inflation metric.")

skywhopper 3y ago

All the talk of a recession last year was always just bluster to justify layoffs and other anti-worker policies and actions. Anytime there’s that much unanimity in the press about the economic outlook whether it’s a coordinated move or just groupthink, you know it’s not going to happen.

berkle4455 3y ago
Do you think the yield inversion was also a coordinated effort?
- douglasisshiny 3y ago
  The yield curve inversion has predicted the last 9 out of the 5 recessions. Could it also be that the two-year yield is higher (than the 10-year yield) because people expect the fed to lower the FFR after a couple of years after inflation has reached their target?
  - berkle4455 3y ago
    > The yield curve inversion has predicted the last 9 out of the 5 recessions. This is a weak argument and the evidence does not support it: https://fred.stlouisfed.org/series/T10Y2Y https://fred.stlouisfed.org/series/T10Y2Y
    - douglasisshiny 3y ago
      Its suggesting that a inverted yield curve alone is as good as a coin toss as far as leading indicators go.
      - berkle4455 3y ago
        It has a 100% success rate based on my observation. And if we're going to disagree on facts, I'm not sure the point in having any sort of further discussion.
3y ago

talldatethrow 3y ago

More proof the dollar is worth less than ever.

rocauc 3y ago

While I welcome optimism, it’s premature to declare strong top line S&P 500 performance as the end of economic uncertainty. Tech is the only sector with significant YTD gains: Brent Crude Oil, Regional Banks, Transportation, and Retail are all down YTD. In the S&P 500, the “Magnificent 7” stocks (NVIDIA, Apple, Google, Microsoft, Meta, Tesla, and Amazon) are responsible for *85%* of YTD gains. Coatue’s East Meets West macro view from June 30 is the source for the above, and it contains a number of great insights: https://www.coatue.com/blog/company-update/coatues-2023-emw-conference https://www.coatue.com/blog/company-update/coatues-2023-emw-...

whatshisface 3y ago
One of those things is not like the other - crude oil is a commodity, and it going down is a good thing (In addition to the Fed's current policy being "raise interest rates until prices stop rising," high energy prices are VERY bad.) That is not really an objection to your point overall, though.
- rocauc 3y ago
  Good call out. Edit - FWIW, energy sector stocks are also down YTD (certainly correlated with lower prices of an inelastic product). I also realized the linked sourced from Coatue hasn’t been on HN and is a good source for independent discussion like this. Submitted: https://news.ycombinator.com/item?id=36565261 https://news.ycombinator.com/item?id=36565261
- alkibiades 3y ago
  it’s usually not a good thing cuz it’s indicative of demand being down which usually means the economy is weak
- everybodyknows 3y ago
  > crude oil is a commodity, and it going down is a good thing Unless you happen to believe that climate change is real, and market-based pressure is useful in its mitigation.

scottLobster 3y ago

Right, because the market has never behaved irrationally. We've got student loan payments resuming soon, a steady stream of commercial real estate mortgages that are refinancing at higher rates for the next year or two, a population who's wages are still on average lower than they were pre-pandemic after adjusting for inflation, supply chain whip-saws as supply/demand continues to over/undershoot in some sectors, the federal reserve saying another couple of hikes are in order this year, and the boomers continuing to age into mass-retirement. You want to dollar cost average into the market fine, but I wouldn't take out any margin loans for at least the next year.

voisin 3y ago
It isn’t irrational if the concerns you’ve mentioned makes the market think the fed will have to drop interest rates again sooner rather than later. At this point the market is essentially a drug addict that just got a shot of Narcan and rather than atone for its sins, has gotten excited that it’s going to live long enough to get at least one more hit. There’s no discipline, no long term, fundamental thinking. Everyone is (and has been for a few decades) just another ape from r/WallStreetBets, even if he or she is wearing a suit and goes to work in a fancy office tower.
- scottLobster 3y ago
  Oh yeah, but the market's been predicting the fed will be "forced" to drop interest rates for about a year now, base solely on the taper tantrum from several years ago. Hasn't happened yet. What the market seems to be conveniently ignoring is that a world where the Fed allows itself to be "forced" into lowering rates to near-zero again is a world where the Fed largely ceases to be relevant. So the Fed is, IMO, going to keep rates at least where they are if not higher if for no other reason than self-preservation. They'll have to see complete market capitulation before they'll consider lowering again. Besides, one of their mandates is price stability. If they lower rates again, guess what happens? More inflation, and then they have to raise rates again because Congress certainly isn't capable of doing anything about it.
temende 3y ago

H8crilA 3y ago

[flagged]

gjvc 3y ago

always remember, "the market is not the economy"

DueDilligence 3y ago

[dead]

mupuff1234 3y ago

Is there an estimate of how much the US stock market is actually based on the US economy? Most of the listed companies are global after all.

no_wizard 3y ago

Anyone have any idea what one of the better index funds is to invest in? Doing some research and trying to follow the general Buffett Rule as it were and I can’t seem to determine what is legitimately going to track the S&P 500 and what claims to but actually doesn’t

pknomad 3y ago
I invest in VTSAX and VOO (the latter tracks S&P500). I prefer Vanguard because it's a private company that is not beholden to shareholders. (disclaimer: I don't own any equity or work for Vanguard).
- platyp 3y ago
  If you invest in Vanguard funds, you are a Vanguard shareholder.
quags 3y ago
The simplest is following the Bogle three fund method VTSAX / VTIAX and VBTLX from vanguard that have a low fee split to your liking. I weight towards us stocks and very little in bonds. If you just did this over the last few years you portfolio would be up now , might have been down last October but over all doing ok. I auto invest in these and then go into single stocks I think are under valued. The books by Peter Lynch were easy and fun reads about investing although you can also get the main points watching a few of his videos on cspan for good information on trading that’s relevant today.
- kuchenbecker 3y ago
  Don't discount bonds, foreign stock, and commodities. Diversified portfolio including bonds is closest thing known to a free lunch.
freetime2 3y ago
Either VOO or IVV (ETFs that track the S&P 500 Index) would make a great choice to buy and hold. Both are managed by reputable companies, have $300B+ in assets under management, and have low expense ratios of 0.03%.

ramesh31 3y ago

Other than RSUs, I'm 100% bonds for the last year, and no desire to bother with it. Yeah I'm probably missing out. Or maybe not. My brain just can't handle caring about it anymore.

thefounder 3y ago

I guess now it's the time to double down the bets. The more "liquidity" you provide the more the stonks go up again!

quags 3y ago

This Peter Lynch talk https://www.youtube.com/watch?v=rf_f8GV0yYM https://www.youtube.com/watch?v=rf_f8GV0yYM is one of the best videos on the stock market I have seen. It’s from the 90s and is relevant today. I like how it goes into how there is always something to worry about like a recession , the difficultly of predicting the market and how even with one of the most successful funds from the 80s every time the market went down his fund went down.

deleted 3y ago

[deleted]

ok123456 3y ago

If there's anything we've learned in the past 20-some years: the stock market has very little to do with the health of the overall economy. Stock prices are the measure, and the measure is manipulated.

lchengify 3y ago

> Sonders said she sees the U.S. as having experienced “rolling” recessions in different segments – such as housing or manufacturing – as opposed to the entire economy being swept up in a full-blown downturn. “The recession versus no recession debate” is missing the current nuances of this cycle, in her view. If we reach 2025 and there's no 2000 style recession, this is the most likely cause. The recession is happening industry-by-industry and at different speeds. Some are sharp and fast (commodities), some are slow (commercial real estate), some happened early (tech), some happened late or haven't even happened yet (hospitality). It also makes sense from a first principles standpoint: If everyone saw it coming due to covid, different industries will react differently, but every industry would definitely act. The difference between now vs '08 and 2000 is information availability, both from the obviousness of the catalyzing event and how ubiquitous financial information has become in the past 15 years. Even as recently as 2008 it was considerably harder to find and act on economic data vs today. Most companies of any size can discover and act on economic data based on how they see fit. Given this, it's not shocking that tech acted first given they have immediate pricing effects and have information-driven cultures. Compare that to CRE where contracts span decades, and pricing is opaque by design.