Generational Market Decline on the Horizon?

Investment Analysis Clubs Macro Economic Trends and Risks
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Ted Oakley, the managing partner at Oxbow Advisors, says he’s concerned about the boomer generation, the youngest of whom are quickly approaching their retirement years. Oakley sees a long-running decline in markets as the AI bubble unwinds, an event that could jeopardize the trillions of dollars that boomers have built up in their investment portfolios, he told Business Insider this week.

In the end, the result could be what Oakley calls a generational bear market, which begins with the S&P 500 tumbling as much as 40% before entering a yearslong stretch of meager returns.

“Because of all the leverage and all the black box investing and all of the total speculation that’s in this market, when you do get selling, you get it fast and furious,” Oakley, whose firm manages over $2 billion, said.

Oakley pointed to the Buffett Indicator, a famed valuation measure popularized by Warren Buffett, which has climbed to a record.

The indicator, which measures the value of the stock market against US GDP, clocked in at 236% this week.

A return to January 1973 or Black Monday 1987 or Dot Com Bust?

NONSENSE tj go with the MO!

Throughout history, rich and poor countries alike have been lending, borrowing, crashing, and recovering their way through an extraordinary range of financial crises. Each time, the experts have chimed, “this time is different”—claiming that the old rules of valuation no longer apply and that the new situation bears little similarity to past disasters. With this breakthrough study, leading economists Carmen Reinhart and Kenneth Rogoff definitively prove them wrong.

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Why the ugly semiconductor rout could get uglier
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We had 'Generational Market Declines" in 2000 and 2008. If you practiced “Long-Term Buy & Hold” you did just fine.

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I am keeping my present portfolio continuing the ride up. And will not sell if a large decline occurs.
I am saving any new money I’m generating into a money market fund. If a big decline happens; I will back up the truck to load up on bargains with that money.
So I am attempting to time the market.

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I am not sure I know what a generational market decline would look like. By far my most successful investment over the last 40 years was my IRA which I dollar cost averaged into throughout the crashes of 1987, 2000-2, and 2007-9. If it lost half of its value and produced 3% dividends that would still be more than I earned my first full year as an attorney in 1981. And Ispouse’s 403(b) and our taxable accounts are also producing income. And if all of that fell to zero we have more cash than we ever dreamt of having, and the ability to live on our Social Security and pension checks.

Lbym and being content with what we have is all there is or ever will be for us.

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JPMorgan Chase CEO Jamie Dimon warned that financial markets are failing to fully account for the dangers confronting the world economy, and that he personally would steer clear of both stocks and long-dated U.S. Treasurys at today’s prices, according to CNBC.

“I do think those risks are probably bigger than other people think,” he said, citing the ongoing conflicts in Ukraine and the Middle East, U.S.-China tensions, and an increase in military expenditure at a time when government deficits are expanding.

On Treasurys, Dimon said he sees little reason to own long-dated government debt. “Even if inflation was 2%, the 10-year bond should probably be at 4-4.5%,” he said, noting that rates are close to that level already and adding, “I don’t understand what the upside is.” He said inflation has run above 3% for nearly five years.

Dimon was similarly cautious on equities. While he said he would consider an individual stock that represented a strong opportunity, he would not be a buyer of the broader market at current valuations, according to CNBC.

Dimon’s cautionary tone puts him at odds with the prevailing mood in financial markets. The S&P 500 is up close to 10% on the year, buoyed by resilient consumer spending, cooling inflation, and a rush of enthusiasm for artificial intelligence.

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And from four years ago…

And from three years ago…

“I said there were storm clouds, big storm clouds. It’s a hurricane,” Dimon said. “Right now it’s kind of sunny, things are doing fine, everyone thinks the Fed can handle it. That hurricane is right out there down the road coming our way. We don’t know if it’s a minor one or Superstorm Sandy. You better brace yourself. JPMorgan is bracing ourselves.”

And from six months ago…

In his latest earnings commentary on Tuesday, the head of the nation’s largest bank signaled short-term optimism, though he remains deeply unsettled by geopolitical risks. “If you asked me in the short run, call it six months and nine months and even a year, it’s pretty positive,” Dimon noted, highlighting a resilient American consumer and a labor market that remains robustdespite slight cooling. He also credited fiscal policy for the current momentum, noting, “There’s a lot of stimulus coming from the one big beautiful bill.”

Despite the immediate sunnier outlook, Dimon’s long-term forecast remains clouded by two primary concerns: chronic fiscal deficits and geopolitical instability.

DB2

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I recognize that Dimon is often right and excellent at navigating risk. Along with that, I am not optimistic that govts, including the US, will show any fiscal discipline. It carries with it very real consequences in terms of eventual austerity and even potentially higher interest rates, if not some outright defaults. But, I wonder what is the typical long term investor suppose to do with this information and should it inform one’s investing strategy?

The reality is markets go down. My own experience is that I would have been better off simply holding through rather than trying to time the market. More often than not, when it does go bad, it is difficult to want to put capital work and the rationale is to simply revise targets downward.

Peter Lynch was famous for saying that despite Magellan Funds outsized long term performance which may have been north of 30% annually, the average investor in the fund did closer to a CAGR of 7%. It was a direct result of trying get out as the market declined and then waiting for the all clear to get back in, missing out on the substantially higher returns by doing nothing.

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True dat. {{ 15 characters }}

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