Boom or Bust: Where are we now ?

[Hariseldon58]

We are all familiar with ( at least the theory of ) boom and bust economic cycles.

My interest in these matters goes back to the 70’s and investing from the mid 80’s, others will have far more knowledge of earlier periods and for some on these boards, they will have more recent experiences.

Since the GFC of 2007-9 we have had a pretty sustained period of good investment returns globally , QE and low interest rates , occasionally periods of volatility( but not that volatile...), but where do people sense we are now ?

The cycle of boom and bust has not been evident for the last 10 years and it would be interesting to hear what others think and where we are now in the global economic cycle ?

[Dod101]

Gordon Brown is being listened to at last?

Dod

[Parky]

I think growth will continue as long as people are prepared to lend money to the US government to finance their deficits . When people realise that the debt is unsustainable, and stop lending, interest rates or US taxes , or both, will have to rise sharply, and we will have a classic bust. It's anyone's guess when that will be.

[TUK020]

The cycle of boom and bust has not been evident for the last 10 years and it would be interesting to hear what others think and where we are now in the global economic cycle ?

Feels like late in the boom cycle.
Trouble is, we have no idea whether the next downturn starts in 3 days aided by coronavirus and Brexit assisted lack of business investment confidence, or another 3 years during which time the S&P puts on another 60%.

[Wuffle]

The very long wavelength stuff isn't promising.
Personally I am impaired by the requirements of parental care.
Nationally are we so different?

[UncleEbenezer]

Haven't you been listening? We've abolished boom and bust. Now it's whatever our masters dictate, and they'll print new money to fill any hole.

It's been hugely inflationary of course. House prices shooting up in about 2000-2005. A correction in 2005 stopped by Ballsian stimulus leading to a bigger would-be correction and credit bust, stopped by QE. Then annuity prices shot up, too. But it was easier to save £100k in the wall-of-money world post-2008 than it was to save £1k a generation earlier.

That's the two big assets in an average lifetime as we knew it, priced to form a moat and keep out the plebs. And a kind-of implied contract that the state won't let those drop back. The reason all that hasn't fed through into consumer prices is the rise of cheap imports - above all, Chinese manufacturing.

The big question now is, how long can we sustain this wall of money feeding asset prices before it spills over into consumer prices? And what then happens? 'Cos that won't look like the busts any of us have experienced - with possible exceptions for those who've lived in much more unstable parts of the world.

(the above is replying to the thread, not to Parky).

I think growth will continue as long as people are prepared to lend money to the US government to finance their deficits . When people realise that the debt is unsustainable, and stop lending, interest rates or US taxes , or both, will have to rise sharply, and we will have a classic bust. It's anyone's guess when that will be.

The market can remain irrational longer than you or I can hope to wait it out.

It's not just the US government - the UK government is hugely exposed. As the world's financial centre, more so than anywhere, as witness the way global money laundering already underpins London. And the US still has real power to go to war to protect dollar hegemony when it sees a threat emerging - once it was Iraq, now perhaps it's the attack on Huawei (which is also an attack on IP/economic competition from Europe) with different weapons.

[fca2019]

I think rather than a crash we'll be looking at slower growth rates in economies and markets.

Things are different now as we are now in a permanent era of near zero interest rates and central banks QE to fill any gaps, the game has possibly changed. This has consequence of growing inequality and poor returns for cash savers.

A lot depends on our orange friend across the pond. If he decides a ceasefire on trade wars, or China trade deal phase 2 markets could bounce up. If there is continued trade wars, Corona worse than expected and Brexit uncertainty will expect low returns.

[Hariseldon58]

Things are different now

It’s an interesting environment that should lead to this reply from a poster... it rarely is different.

There is no sign that “normal”
Interest rates or inflation will return any time soon but it has to be on the cards at some point.

[Eboli]

The most promising theory is Fred Harrison's 18 year property cycle. This consists of 4 years down, followed by two 7 year up cycle with a pause or small down in the middle. The last cycle ended in 2007 so we are at the start of the upturn of the second part - and this should be at least twice as much as the first part. So on the basis of FTSE 100 3800 to about 7500 we could be looking at a large boom through the early 20s until and equally big bust in the middle.

Eb.

[LooseCannon101]

Most equity booms end with excessive valuations especially for so called 'hot' stocks. Market averages are not out of the normal range at present, and there is still a fair amount of fear.

If I had to guess, I would say that the bull market will last another 5 years which could see global equities rise by over 50%. Of course, I could be wrong. This is why we read so many investment books and business articles.

When the man in the street, not a Lemon Fool type, is talking about the market, then we are probably approaching a dangerous high. We are nowhere near this stage.