Recession on the horizon?

Hello everyone!

So, everyone at work seems to be pretending to be an economist lately, saying they are all waiting for the stock market “bubble” to burst and the US to enter a recession. I want to get peoples thoughts from this forum, thoughts from people who might actually be aware, or have information to back up their argument.

Are you moving your investments to more defensive companies, or investing aggressively and taking advantage while you can?

If you put all your money in stocks at the height of the 2007 stock market and held onto your position until today, you still would have doubled your money in 10 years. There is always a possibility that some unforeseen event might trigger a market downturn at any time. However, any gains you might have from trying to predict the timing of this downturn will likely not justify the opportunity cost of not using your capital in the mean time.

dont worry about recession if you have high quality companies with wide moats that generate high cash flows

How is it a bubble when literally everyone says it’s overvalued? I echo Ohai point. I’m a long term investor, so I’m not concerned. I do allocate to countries that are relatively cheaper passively outside my retirement, but that is because I believe in the mean reversion of country valuations. Historically cheaply valued countries outperform

markets are cyclical yes?

there you go. lol.

its overvalued.

short term rates are expected to rise ~75bps/year. long term rates are surprisingly falling. yield curve getting flatter, in 3 years assuming just short term rates rise, shit’ll be inverted. anyways if rates rise, ppl will shift to risk free assets, but yes interest rates are still abnormally low.

Couldn’t Schiller PE also decline when earnings increase?

as BS would say, sell cyclicals when PE is low and buy when its high.

factcheck can we get a factcheck here please

Yes. GAAP rules have also changed over time, impacting the comparability to historical periods. Last I heard Schiller was attempting to make a new index that adjusts for that

i think now is the time to make sure your asset allocation is proper. if you’ve drifted to 90% equity over the past nine years but you should really be at 60/40, rebalance.

a near term recession or market crash is unlikely given US ISM Manufacturing just came in at a 13 year high. maybe a recession will start 9-12 months from now but as it stands, we’re firing on all cylinders. you could see a 5-10% pullback while the economy is roaring but it would be historic to see a market crash while the economy is roaring.

sort of agree with mla, i think you should be at proper balance at the maximum, but you can go more defensive if you want. there is no point in being greedy right now, if you were greedy at the market bottom, you are close to tripling your shit.

ism is bad when peaking, just fyi. so the fact thats its a 13 yr high is bad.

economy and earnings are no longer correlated. earnings more important. and earnings have done pretty well since 2016, but price increase increased a lot more. so valuations have crept up.

Yea, it’s like the what goes up must come down. As you all know trying to predict when the market will pull back/crash will drive anyone crazy. What I think is a good idea is allocating some capital to non-cyclical stocks that have a low downside risk. If you can’t afford to lose your capital then have a cash position as well. As was said if you held through the last bubble you would still be up so it isn’t the end of the world if the market crashes, but it would be awesome if you didn’t faceplant during that time. For me, I traded some of my upside potential for companies that can weather the storm of a market crash.

the article you posted as evidence that the ism being high is bad was posted in April 2010. not the best indicator clearly. ism peaks don’t indicate market crashes, they indicate weak markets ahead. but what is a peak? maybe we go 10% higher on the ism before peaking. can’t tell at this point.

the best indicator for recession is the stock prices of TSM, INTC and MU. when the semi purchases or purchase outlook falls, true business spending on somewhat discretionary purchases is likely falling and the business outlook is likely deteriorating.

Looking at the market that way, no wonder many bears are throwing in the towel. For the first time, money managers who rank as the most skeptical in a weekly survey by the National Association of Active Investment Managers also report being almost fully invested in stocks, according to Bloomberg News’ Lu Wang. Normally, the least bullish rung in the survey contains a bunch of managers who are short the market, but last month they were 90 percent long. Elsewhere, a quantitative model developed by Morgan Stanley shows hedge funds are more optimistic on stocks than at any time since the global financial crisis, Wang reports.

“Bear market managers”. All these guys do is make money selling earthquake insurance after it has already happened.

A poem inspired by this thread:

They said the market was sure to crash,

That people would lose all there cash,

Why can’t we stop this wild ride,

It seems we need to look deeper within.

And once the people have learned a soul is worth more than the almighty doller they will stomp their feet and start to yell, for the time wasted never to return.

Forget recession, I think this is near the all time high, right before everyone flees, the end of America and the S&P500. They know it’s over, that’s why they are so desperate to keep it propped up for this one last run.

pa what do you think about the chinese gov taking a piece of some corporations. good/bad?

Alphie- What’s the S&P 500 going to run to before it crashes? Call a number, and I’ll give you an additional “150-point buffer” – and a chance to destroy all those you doubt you.