What is different now between then is the fact there is no longer cheap money. The risk-free rate of return is exponentially higher today than it was in the last decade.
Hawkwin
Not panicking but keeping one hand firmly on a lifevest.
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True.
Retired folks with savings may benefit from higher interest rates though. And the US is aging though not as fast as other nations. A growing demographic that has political and economic consequences.
Gold and or silver.
Why? My dear sister (DSis) a week ago, got a couple thousand that she doesn’t yet “need”, n asked me for suggestions.
I suggested she spend a portion n save a portion as emergency fund.
For the emergency fund, I suggested CDs at her credit union.
She went down n asked about CDs.
DSis casually mentioned yesterday that they asked if she might be interested in gold or silver.
I was appalled.
She needs to safe guard the cash … not “risk” it.
I told her “No. Just no.”
Then I told her “it’s your money, you do you.”
I texted her later and suggested she open a Fidelity, Vanguard, or Schwab account.
At any rate, the ShoeShine Department rec’d gold n silver.
As for “fear when others are greedy, greedy when others are fearful”.
I’m not yet getting the “giddy, to the moon” emotions.
The fear n greed index is 62, the low side of greed.
ralph
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Does DB2 have a prediction?
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Because of future tariffs, prices are likely to be higher; higher prices ==> inflation.
DB2
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Yes indeed. I should have flipped my IRA in the late 90s. I never imagined the stack would get to where it is.
There seem to be a few out there that have potential. We discussed HUM yesterday, down bigly due to unfavorable reviews of their service. If HUM’s suit to reverse the impact of the reviews is successful, they may be up bigly. MRK has been sliding downhill for months, but the numbers seem solid. Just because the law says Medicare can negotiate drug prices, doesn’t mean Medicare will, or will negotiate aggressively. The divi isn’t bad either.
Steve
Then add in record corporate profits.
Perhaps a return to stagflation level of interest rates?
My immediate take is to wait and what he does, which often bears no resemblance to what he said he would do.
Given the transactional nature of musk and T, I would expect a multi billion dollar bribe followed by a total reversal of T,s previous positions on ev’s followed by a huge ev build out that coincidentally adds billions to the personal net worth of both.
Putting aside the ethics of deporting one million immigrants who are predominantly extremely hard workers performing a myriad of difficult, low paying jobs in a country with an aging population, mass deportation is likely to add fuel to the fires of inflation.
Massive increases in already massive deficit spending are likely to fuel the fires of inflation. The tcja raised deficits by about $1.9T. Not sure why that does not matter to voters but we must deal with reality when investing.
T’s previous tariffs on steel and washing machines produced price increases and no increased production here in the U.S., so I assume that the experts are correctly predicting new tariffs, if passed, will also be inflationary. Not sure why our past experience with tariffs went unnoticed.
That leaves our entire economy in the hands of the Fed, which collapsed under political pressure in December of 2018. Despite recent tough talk, I expect more of the same.
Inflation and uncertainty are my best bets.
I will probably roll my 7 month, 5% cd into a 3 month 4.5% cd when it expires next week.
I will probably keep an oversized cash position in a savings account near fdic limits for another year or four.
The bulk of our money will remain in low cost diversied ETFs because I don’t know what else to do.
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“Yes, tax cuts are a priority. And this time paying for them is expected”
You really believe that, Paul ??
TFG blew up the deficit the last time his tax policy was enacted. I heard the Tesla/X guy say that to expect 2 years of hardship for the average working class American. I sure haven’t heard TFG say that. Working class voter expectations are that ALL OF THEIR PROBLEMS ARE SOLVED now that TFG is going back in.
I’ve got my popcorn ready, gonna be fun.
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How is that likely to change from, say, the last year or two?
DB2
Then that means less money invested in the stock market. That isn’t a “though” comment, that would be an “and” comment.
I noticed something interesting today. My cash account is all green, except MSFT is down. Maybe someone else is thinking XAI has the inside track on something?
The hostility to EVs is widespread in the faction (an earlier post of mine on that topic has been FA’s for some reason), so doing a 180 and going all in on EVs would not be popular in the lifted, V8 powered, pickup cohort.
Steve
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I think this depends on what Congress is willing to agree to. We shall see. Experts do point out the present deficit is not sustainable. Fed Chair Powell said that just the other day.
Globalization in the 1990’s and early 2000’s destroyed the economic situation of blue collar workers as factories were shipped to China. That caused the voter revolt in 2016. The resulting regime provided little in relieve to the blue collar working class, though elites were rewarded with good stock market returns. That regime was kicked to the curb in 2020. The new regime had significant inflation when compared to previous low inflation climate. That regime was kicked to the curb.
I doubt there is much faith in the new regime. The election results now are just an expression of “tossing the bums out of office”.
I can foresee a future where no president will last more than 1 term especially if income inequality increases and income mobility declines further
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In which sector? Tech stocks headed by Nvidia seem to continue to do well. Many consumer stocks report missing earnings due to slowing sales. Cutting interest rates should help but you have to be selective.
How about simply planning on everything the previous guy did, being unwound, and going in the opposite direction?
Steve
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I don’t know. tjscott0 brought up “greedflation”. How does that vary by sector? Is it expected to change?
DB2
Expanding on that thought, I would think that massive government subsidies are as likely to draw reprisal from trade partners as massive tariffs.
In the early days of Airbus, Boeing howled, constantly, about Airbus receiving government subsidies. Airbus’ reply was that Boeing was subsidized too, with the subsidies dressed up as guaranteed profit defense contracts.
Now, the current guy is subsidizing domestic EV and semiconductor production. TFG is taking the opposite tack: giving domestic producers profit protection by imposing tariffs on imported competition. If you are a foreign competitor, one approach is just as “unfair” as the other.
Steve
My growing list of things to avoid for a bit…
- companies related to vaccines
- companies in manufacturing that need parts
- fast food and restaurants that will need spending cust
- solar panels and solar parts companies, probably also diversified energy companies
- any form of shipping related to ships, rail, trucking or suppliers of parts
- no idea how medical insurance or heathcare is going to go, so avoiding out of caution (caveat, unless someone has treatments for polio, mumps, measles?)
So I just moved 3% of my IRA into a 4.5% Treasury maturing 1/9/2025. My plan as of now is to move 20-25% of the IRA into Treasuries and a money market at 4.7% and see what happens early January. Currently I am invested in VOO, VTV, VFMV, QUAL, VBR and VBIAX, plus the Treasuries. This is a radical departure from my portfolio 2-3 years back.