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It is surprising that with all the new uncertainty around the future of the USA, that in dollar terms, the S&P 500 and the Nasdaq 100 are both still traded high

It is surprising that with all the new uncertainty around the future of the USA, that in dollar terms, the S&P 500 and the Nasdaq 100 are both still traded higher than a year ago. Gold is up 36%. Not that much. Bitcoin is up 29%. Also not that much. Is the uncertainty not yet priced in? STOXX Europe 600 is down 2%. Shouldn't it increase in value? European companies will earn less in a recession, but I would think investors do not want to invest solely in bonds, gold and bitcoin. So I would expect a shift of a lot of capital into European equities once investors fully digest the new uncertainty in the US. Is there any potential upside to US equities I am missing?

pjc50 2y ago
It is irksome that the goldbugs are right (at the moment) and the best performing asset in my UK portfolio recently has been gold half-sovereigns. Oh, and of course my house.
- mcny 2y ago
  > Oh, and of course my house. It is so frustrating explaining to people that for the ordinary folks who only own one home or even a dozen homes, it is NOT a good thing that home values are reliably trending up over time. If you own thousands, sure. But everybody needs somewhere to live do if you own one home, you don't really come up on top.
  - Clubber 2y ago
    >But everybody needs somewhere to live do if you own one home, you don't really come up on top. Versus paying someone rent your whole life? You absolutely do.
    - mcny 2y ago
      Thank you for proving how hard it is to get across to people. I don't want to discourage home ownership. On the contrary, I want home ownership to be easier. However, that requires homes to be abundant and cheaper. We can't have both: 1. Cheap, affordable housing for everyone 2. Housing as a stable investment that keeps going up in value forever One of these two has to give.
      - Clubber 2y ago
        Yes, the way to do it is to tax investment properties. Many states already do that through the homestead exemption though. https://www.quickenloans.com/learn/homestead-exemption https://www.quickenloans.com/learn/homestead-exemption Another problem is everyone wants to live in the same few places. Missouri's average house costs around $250, which is pretty reasonable, it's just a lot of people don't want to live in Missouri. https://www.zillow.com/home-values/32/mo/ https://www.zillow.com/home-values/32/mo/ The housing market in Detroit is even cheaper: $76K for an average home, what a steal! https://www.zillow.com/home-values/17762/detroit-mi/ https://www.zillow.com/home-values/17762/detroit-mi/ If you think you're going to get cheap home prices in places Silicon Valley or NYC, it's just not going to happen because everyone wants to live there.
  - jrmg 2y ago
    And if house prices are lower, it’s cheaper for you to get a better house. I always try to think of our house as ‘well, no matter the economy at least we own a house to live in’ rather than think of its monetary value. House prices being higher are good if you are planning to downgrade when the children leave the nest though. Or I guess if you reverse-mortgage it when you retire.
  - mcntsh 2y ago
    If they all rose the same equally everywhere you'd have a point, but that's not really the case. If your home in Palo Alto goes from 750k to 3M and a house in Arizona goes from 250k to 550k you benefit by selling your house in Palo Alto and moving to Arizona.
  - itake 2y ago
    Homevalues trending up act as a force savings account with 1-4% interest. Most people spend the money they have in their bank account, which is terrible for their later years.
FirmwareBurner 2y ago
>the S&P 500 and the Nasdaq 100 are both still traded higher than a year ago. That's how inflation works.
- ArtTimeInvestor 2y ago
  That's why I just added Gold and Bitcoin. If we compare with those assets that have lower inflation, it is still just a reduction in equity prices of 30%. If there is so much new potential downside and no upside - shouldn't equities trade at least 50% lower?
  - roenxi 2y ago
    You're underestimating how big a deal 30% is; it'd be like deleting California and saying that just 15% of the US economy had disappeared. It represents a capital allocation misstep of titanic proportions.
    - ArtTimeInvestor 2y ago
      -30% is a big deal. But in 2008 we saw the S&P-500 decline 50%. And the Nasdaq-100 30%. In 2000 the S&P-500 and the Nasdaq-100 both declined 80%. In dollar terms. To me it seems that the 2000 dotcom decline and the 2008 financial crisis were once in a decade events and now we are witnessing a once in a lifetime event.
      - benrutter 2y ago
        I think anyone who tells you they can make sense of what's happening is being overconfident. I definitely see where you're coming from expecting a bigger drop, I guess the key thing is that nobody yet is sure what the future of the latest pretty major anouncements looks like, we're currently just seeing bets. It's possible that tariffs stay high, and US companies like Apple and Nike that depend on global supply chains either relocate, or become outcompeted by foreign companies. In that scenario, I think we'd see a major drop in indexes like the S&P-500, probably out doing the financial crisis in 2008. It's also possible that the tariffs end up being an overblown bargaining chip, or get walked back as the current US administration realises they are unpopular and loses interest in them. In that case, you'd probably see the S&P take a hit because of the uncertainty, but it's not the same as US companies all finding their supply chains are unworkable. So I guess the tldr is, shrug, who knows? We're just seeing the market guessing at the moment, the actual economic damage will happen over the next year as things progress more clearly.
noodlesUK 2y ago
I think one of the key things here is that those prices are denominated in dollars. If the real value of dollars falls, so does the value of those equities. If the nominal price falls, and the unit of measurement is falling at the same time, the actual value of represented has fallen more (potentially a lot more) than it seems like at first glance. There’s been a lot of inflation over the past couple of years, and it’s likely that this period will contribute even further. I also think that the uncertainty hasn’t been fully priced in yet. I think that traders are hoping that this all blows over.
ohgr 2y ago
Firstly the market was heavily inflated by hyped shit in the last year so past performance was bad but the numbers went up. Then there’s the currency situation which masks a lot of the decline. There’s a bunch of locked in shares and some of the high holding investment companies don’t give a crap as long as their AUM rank stays the same. They make money on fees still. On top of that to sell you need buyers. That is not a problem for low volume traders but big holders won’t be able to shift lots. So the big ETFs, while the market position would be better to sell now, they can’t. Gold isn’t a good bet either. What’s the betting when people ask for it, the answer is no. There is no upside, just a slow deflation which isn’t as bad as some sensationalists expect. That isn’t a reason to crow about the current state. It’s like saying you’re cured because the first round of chemo was successful.
JanisErdmanis 2y ago
Isn't the stock market detached from the dividends that the corresponding stock provides in comparison to the obligation market? People are holding stocks, hoping they are going to be the first ones to leave when the boat sinks.
bruce511 2y ago
Frankly there's not much gleaned from stock prices over a short term. The market can be very reactive to events, but then quickly recover once the "new normal" is established. There are certainly indications that the economy will contract (but by low single digits at worst.) 30% swings in stocks represent either highly inflated valuations before, or radically different outlooks after. That may be true for a stock here or there, but not the market as a whole. The US bond market is a more interesting signal. That will affect future-debt cost, and that significantly moves the needle.
- ArtTimeInvestor 2y ago
  Frankly there's not much gleaned from stock prices over a short term It's easy to disprove that. If it were to hold true, a "buy if the price is below the 100-day-mean, sell if above" would be profitable. And that approach would be exploited to the extent that this pattern goes away.
  - bruce511 2y ago
    You're talking about an individual stock price. I'm talking about the market. Put another way, your strategy completely works because stocks (as a market) trend upward. You'd want to better define "above" and "below" (because, transaction costs) and you'd also want to consider the period (100 days).
Galanwe 2y ago
> in dollar terms, the S&P 500 and the Nasdaq 100 are both still traded higher than a year ago. The key here is "in dollar terms". EURxUSD is up 10% year to date. If you were a European investor buying the SP500, you would have lost 10% more on FX rate on top of your SP500 loss.
bhawks 2y ago
The uncertainty is not in the US. The uncertainty is in the global reserve currency that is used to price every transaction and structure terms of every contract. The tariff panic is the straw that broke the back of an already over stressed, over leveraged system. If equities are doing 'well' it's because some of the really strong companies may be able to persevere through all the chaos. I don't think most people will be able to predict which companies those will be. With money itself broken I wouldn't want to hold onto too much physical cash or bonds. There will be many sovereign defaults (or money printing - which is just as much of a default). Gold and bitcoin will still exist after we get through this chaotic period and therefore many people are rotating into those assets.
the-grump 2y ago
36% is MASSIVE for a metal treated primarily as a store of value.

pjc50 2y ago

It is irksome that the goldbugs are right (at the moment) and the best performing asset in my UK portfolio recently has been gold half-sovereigns. Oh, and of course my house.

mcny 2y ago
> Oh, and of course my house. It is so frustrating explaining to people that for the ordinary folks who only own one home or even a dozen homes, it is NOT a good thing that home values are reliably trending up over time. If you own thousands, sure. But everybody needs somewhere to live do if you own one home, you don't really come up on top.
- Clubber 2y ago
  >But everybody needs somewhere to live do if you own one home, you don't really come up on top. Versus paying someone rent your whole life? You absolutely do.
  - mcny 2y ago
    Thank you for proving how hard it is to get across to people. I don't want to discourage home ownership. On the contrary, I want home ownership to be easier. However, that requires homes to be abundant and cheaper. We can't have both: 1. Cheap, affordable housing for everyone 2. Housing as a stable investment that keeps going up in value forever One of these two has to give.
    - Clubber 2y ago
      Yes, the way to do it is to tax investment properties. Many states already do that through the homestead exemption though. https://www.quickenloans.com/learn/homestead-exemption https://www.quickenloans.com/learn/homestead-exemption Another problem is everyone wants to live in the same few places. Missouri's average house costs around $250, which is pretty reasonable, it's just a lot of people don't want to live in Missouri. https://www.zillow.com/home-values/32/mo/ https://www.zillow.com/home-values/32/mo/ The housing market in Detroit is even cheaper: $76K for an average home, what a steal! https://www.zillow.com/home-values/17762/detroit-mi/ https://www.zillow.com/home-values/17762/detroit-mi/ If you think you're going to get cheap home prices in places Silicon Valley or NYC, it's just not going to happen because everyone wants to live there.
- jrmg 2y ago
  And if house prices are lower, it’s cheaper for you to get a better house. I always try to think of our house as ‘well, no matter the economy at least we own a house to live in’ rather than think of its monetary value. House prices being higher are good if you are planning to downgrade when the children leave the nest though. Or I guess if you reverse-mortgage it when you retire.
- mcntsh 2y ago
  If they all rose the same equally everywhere you'd have a point, but that's not really the case. If your home in Palo Alto goes from 750k to 3M and a house in Arizona goes from 250k to 550k you benefit by selling your house in Palo Alto and moving to Arizona.
- itake 2y ago
  Homevalues trending up act as a force savings account with 1-4% interest. Most people spend the money they have in their bank account, which is terrible for their later years.

FirmwareBurner 2y ago

>the S&P 500 and the Nasdaq 100 are both still traded higher than a year ago. That's how inflation works.

ArtTimeInvestor 2y ago
That's why I just added Gold and Bitcoin. If we compare with those assets that have lower inflation, it is still just a reduction in equity prices of 30%. If there is so much new potential downside and no upside - shouldn't equities trade at least 50% lower?
- roenxi 2y ago
  You're underestimating how big a deal 30% is; it'd be like deleting California and saying that just 15% of the US economy had disappeared. It represents a capital allocation misstep of titanic proportions.
  - ArtTimeInvestor 2y ago
    -30% is a big deal. But in 2008 we saw the S&P-500 decline 50%. And the Nasdaq-100 30%. In 2000 the S&P-500 and the Nasdaq-100 both declined 80%. In dollar terms. To me it seems that the 2000 dotcom decline and the 2008 financial crisis were once in a decade events and now we are witnessing a once in a lifetime event.
    - benrutter 2y ago
      I think anyone who tells you they can make sense of what's happening is being overconfident. I definitely see where you're coming from expecting a bigger drop, I guess the key thing is that nobody yet is sure what the future of the latest pretty major anouncements looks like, we're currently just seeing bets. It's possible that tariffs stay high, and US companies like Apple and Nike that depend on global supply chains either relocate, or become outcompeted by foreign companies. In that scenario, I think we'd see a major drop in indexes like the S&P-500, probably out doing the financial crisis in 2008. It's also possible that the tariffs end up being an overblown bargaining chip, or get walked back as the current US administration realises they are unpopular and loses interest in them. In that case, you'd probably see the S&P take a hit because of the uncertainty, but it's not the same as US companies all finding their supply chains are unworkable. So I guess the tldr is, shrug, who knows? We're just seeing the market guessing at the moment, the actual economic damage will happen over the next year as things progress more clearly.

noodlesUK 2y ago

I think one of the key things here is that those prices are denominated in dollars. If the real value of dollars falls, so does the value of those equities. If the nominal price falls, and the unit of measurement is falling at the same time, the actual value of represented has fallen more (potentially a lot more) than it seems like at first glance. There’s been a lot of inflation over the past couple of years, and it’s likely that this period will contribute even further. I also think that the uncertainty hasn’t been fully priced in yet. I think that traders are hoping that this all blows over.

ohgr 2y ago

Firstly the market was heavily inflated by hyped shit in the last year so past performance was bad but the numbers went up. Then there’s the currency situation which masks a lot of the decline. There’s a bunch of locked in shares and some of the high holding investment companies don’t give a crap as long as their AUM rank stays the same. They make money on fees still. On top of that to sell you need buyers. That is not a problem for low volume traders but big holders won’t be able to shift lots. So the big ETFs, while the market position would be better to sell now, they can’t. Gold isn’t a good bet either. What’s the betting when people ask for it, the answer is no. There is no upside, just a slow deflation which isn’t as bad as some sensationalists expect. That isn’t a reason to crow about the current state. It’s like saying you’re cured because the first round of chemo was successful.

JanisErdmanis 2y ago

Isn't the stock market detached from the dividends that the corresponding stock provides in comparison to the obligation market? People are holding stocks, hoping they are going to be the first ones to leave when the boat sinks.

bruce511 2y ago

Frankly there's not much gleaned from stock prices over a short term. The market can be very reactive to events, but then quickly recover once the "new normal" is established. There are certainly indications that the economy will contract (but by low single digits at worst.) 30% swings in stocks represent either highly inflated valuations before, or radically different outlooks after. That may be true for a stock here or there, but not the market as a whole. The US bond market is a more interesting signal. That will affect future-debt cost, and that significantly moves the needle.

ArtTimeInvestor 2y ago
Frankly there's not much gleaned from stock prices over a short term It's easy to disprove that. If it were to hold true, a "buy if the price is below the 100-day-mean, sell if above" would be profitable. And that approach would be exploited to the extent that this pattern goes away.
- bruce511 2y ago
  You're talking about an individual stock price. I'm talking about the market. Put another way, your strategy completely works because stocks (as a market) trend upward. You'd want to better define "above" and "below" (because, transaction costs) and you'd also want to consider the period (100 days).

Galanwe 2y ago

> in dollar terms, the S&P 500 and the Nasdaq 100 are both still traded higher than a year ago. The key here is "in dollar terms". EURxUSD is up 10% year to date. If you were a European investor buying the SP500, you would have lost 10% more on FX rate on top of your SP500 loss.

bhawks 2y ago

The uncertainty is not in the US. The uncertainty is in the global reserve currency that is used to price every transaction and structure terms of every contract. The tariff panic is the straw that broke the back of an already over stressed, over leveraged system. If equities are doing 'well' it's because some of the really strong companies may be able to persevere through all the chaos. I don't think most people will be able to predict which companies those will be. With money itself broken I wouldn't want to hold onto too much physical cash or bonds. There will be many sovereign defaults (or money printing - which is just as much of a default). Gold and bitcoin will still exist after we get through this chaotic period and therefore many people are rotating into those assets.

the-grump 2y ago

36% is MASSIVE for a metal treated primarily as a store of value.