odysseus2000 wrote:vand wrote:It wouldn't surprise me if the likes of Jeremy Grantham are actually calling it correctly, and we are in the early stages of what is likely to be a brutal bear market.
It feels more and more like 2008 imo - the market tries to rally a bit but then gets sold off again. This week European stocks have been absolutely crushed. You can say that the Ukraine situtation is contributing to that, but I think that's just one of several factors. Energy prices going through the roof will eventually feed through to falling corporate profits, and a combination of lower earnings and higher inflation does not make for a very encouraging environment for a stock market that is still very expensively priced.
The yield curve is flattening at an alarming rate and could move into full inversion within a few weeks if it keeps going.
If this continues it is more like 2001 imho.
Then, as now, we had had a big run in the markets especially new tech and then the markets sold off hard and many highly valued companies corrected.
There was no over arching crisis as we saw in 2008 with US banks, but a more general ambiance that the good times must keep rolling, not unlike 1929 and then when some selling started the whole market rotated from high value growth to low value staples and such.
A counter argument is that products have become more essential and thence more sellable at higher prices in globally connected markets. Additionally we now have strong inflation, but with such an indebted population that higher interest rates would crush the economy and send us into depression.
Difficult for me to quantify but as of now I am estimating about a 50:50 probability that things go higher or crash and a crash imho won't go off the table quickly.
The politicians seem divided over those that want a reset to effectively take a away a lot of sovereign debt by strong inflation and those who believe the world can grow itself out of this mess.
If markets really start to slide everything is set for a serious crash that it is unlikely central banks can stop. To avert this we will need a return to
excessive government spending as being pushed in Germany to arm and the Fed to take Internet raises off the table.
Most politicians will imho soon realise there is a depression danger and lobby for monetary easing, but inflation policies they pushed through such as limiting HGV working hours may have already done too much damage to repair.
Interesting times!
Regards,
Yes, I suppose most bear markets have a lot in common.
One of the things that was recently pointed out to me was - with the exception of 1929 - how bear markets never begin with a crash. There is first a loss of momentum from the blowoff top, and then a year or so of rallies and selloffs as the bulls and bears fight it out, and then eventually the bears gain the upper hand and the rest of the bear market then unfolds. Looking at the charts, it very much looks like that's the pattern we are undergoing at the moment, with the momentum now rolling over as the YoY returns go to zero and then eventually negative.
Another factor is that stock markets traditionally struggle during periods of higher inflation. They are not an inflation hedge as the perma bulls like to claim, but rather they prefer low and disinflationary environments, with the ability to tolerate mild inflation.
Lastly, the 10-year decennial stock pattern simply suggests that it's time to play defence, as stocks usually struggle for the first 4 or so years of the "average" decade.. yes, last year they did well, bucking that general trend, but that could have just been setting us up to unwind it this year.