This is not meant to be a political post, just what I see as a legit possibility in the coming months:
There’s a non-zero chance this administration unintentionally creates a black swan event that tanks the market as well as the economy. Could be hiding/mismanaging bird flu leading to mass death (and no effort on vaccine research), the doge-controlled treasury missing bond payments that non-political bureaucrats used to take care of, installing bad code that does massive damage….or some other act of incompetence yet to come. Tough to see how we make it through unscathed.
I have raised my cash to 15 percent (hopefully treasuries are safe).
I was plenty concerned in 2016, as the character of the new POTUS was obvious. Went very cash heavy. Left a huge amount of loot on the table. My assessment is nothing will happen that will hurt the stock market. Even another plague, would be met by disinformation, and people told to shut up and work. Anyone who said anything about masks, or shut-downs, would be quickly whipped into line, or exiled.
I had concerns in 2016, but decided to let my portfolio run. While I disagreed with many of the nominations, most of them appeared to be competent and qualified.
This time I am slowly increasing my cash position. I’m seeing too many nominations in key positions that I consider to be both unqualified and incompetent. Plus, at my age, I may not have the time to wait for the market to recover from a really bad crash. At this point, I wouldn’t consider a recession to be a black swan event. And I’ll throw in that I consider the current market to overvalued. I’m more into wealth preservation mode at the moment.
And frankly, I think giving outsiders access to our Treasury payment system to be an enormous unforced risk on many levels. I know a judge recently squashed that, but the cat is already out of the bag.
Take anything I say with a very large grain of salt, although I’ve successfully called 18 of the last 2 recessions.
Look up tariffs in regards to 1894, 1921, 1922, and 1929. Look at the patterns in the markets.
The market is in trouble. We will have a global depression starting as of a few weeks ago and spreading for a year or more.
We will have deflation from the tariffs.
The austerity and tax cuts will implode the bond market.
2019 was different. First it was not in the demand side period in the US. Now is a demand side period. 2019 was the supply side period. Second when inflation did show up during covid the tariffs might have helped keep some inflation at bay.
Austerity caused inflation in the UK. More spending as a result is now causing more short term inflation but the factory build out will create a deflationary pressure and wealth in the UK.
Here austerity will cause rates to rise. That will cause a deeper recession/depression. The rise is in relative terms. With less aggregate demand the US will see spiraling deflation.
If anyone could call a recession or depression they would be the richest man on earth. Nobody can see the future, those calling for a recession have been doing so for a very long time. Every time another party takes power we start to see the other side calling for a recession.
Not really very logical. I call them “lock loss” orders. Because if one day there is a huge scare (like threat of bond crisis, or threat of housing crisis, or threat of nuclear war, etc) and the market opens down 30%, your trade will trigger at -30% (or worse for typically volatile stocks). Then an hour later suddenly the news is clarified that there is no calamity in progress and the market then stabilizes more or less where it normally would have been. You have “locked in” your loss of 30+% by selling during the brief period of panic.
Sometimes even a simple market error can trigger these kinds of trades.
Yep. It’s hard to market time a recession, but pretty easy to look at a chart and identify the 200 year, long term upward trend of the stock market.
I’ve never understood “wealth preservation” for the elderly with assets. If you have more than enough, aren’t you investing for your grandchildren or charitable beneficiaries? They’ll likely benefit from a long-term perspective, too.
Yes, we would like to leave something for our children/grandchildren and to certain charities, if we are able to.
I certainly appreciate your view on having a long-term perspective for the stock market, which coincides with mine. I’ve held fast through more than a few market dives as well.
But something feels very off to me about the current state of affairs. Stupidity surrounded by stupidity. Incompetence surrounded by incompetence. No checks and balances.
I just don’t see a lot of good coming out of our current state of affairs. So I’m doing what feels most comfortable for me.
