Is the stock market going to tank?

[Brock Landers]

My point was in a cyclical bull market it does not take much skill to do well. On January 1st 2012 the S&P 500 was 1370, today it is roughly 2315. Pick your date and you can make it look really good or not as good. If you take the peak of the dot com bubble, January 2000, right before the crash the compound average return is 4.47%. But move it back to 1995 and the annualized S&P 500 return with dividends reinvested is 9.55%. I am an old guy, go back to 1950 and its 11.92%.


http://www.moneychimp.com/features/market_cagr.htm

I don't think anyone in here looked back at Jan 1 2012 as their personal investment start date either. Yes, the last 5 years the market has been strong in terms of returns. But that doesn't mean what 4m or anyone else is doing with their own account is wrong.

Having the ability to take money out of the market or have other options outside of 'put it in the Dow' can add value. It may be a detractor. But having your money sitting in the S&P 500 'when the Bear hit' as you say doesn't shield you from any risk. Quite the opposite.

[Bromontana]

Looks like a good time to trim semiconductors. NVDA stalling on the weekly chart after a parabolic 3 years & 10x gain.

[4matic]

I don't think anyone in here looked back at Jan 1 2012 as their personal investment start date either. Yes, the last 5 years the market has been strong in terms of returns. But that doesn't mean what 4m or anyone else is doing with their own account is wrong.

Having the ability to take money out of the market or have other options outside of 'put it in the Dow' can add value. It may be a detractor. But having your money sitting in the S&P 500 'when the Bear hit' as you say doesn't shield you from any risk. Quite the opposite.

With interest rates this low cash is not a crime. 5 yr treasury only yields 1% so why have any risk at all?

When you have the game won don't play.

[Danno]

I'm no expert on any of this. But I have started feeling uneasy with almost all of my investments being in stocks. Just seems like even absent the "artificial" volatility caused by #45, we're due for a correction soon. And #45 just adds too much for me, seems like we are ripe for some fucked up shit to happen in the world which in itself could cause markets crashing. I'm not smart enough or confident enough to pull completely out of the market, but I think I'm going to move from 100% stocks to something more like 30-40% stocks, and the rest in govt bonds (though it feels squirrelly to invest in the government when its my government that is the thing that scares me!).

[4matic]

I'm no expert on any of this. But I have started feeling uneasy with almost all of my investments being in stocks. Just seems like even absent the "artificial" volatility caused by #45, we're due for a correction soon. And #45 just adds too much for me, seems like we are ripe for some fucked up shit to happen in the world which in itself could cause markets crashing. I'm not smart enough or confident enough to pull completely out of the market, but I think I'm going to move from 100% stocks to something more like 30-40% stocks, and the rest in govt bonds (though it feels squirrelly to invest in the government when its my government that is the thing that scares me!).

Small incremental changes. Sell 10% and see if you feel better. You can always sell more higher or lower. Being right is not supposed to feel good.

[406]

Danno, I'm in the same boat and cashed in my personal brokerage account and now thinking about 401k. Are you planning to keep the govt bonds to maturity? I wouldn't think there is much risk in that, if the USA stops paying those, we will have bigger problems. I never understood bond funds as a "safe" investment when interest rates are low and the bond fund options in my 401k plan are not very good, so only have a 1.21% guaranteed option.

[Danno]

Danno, I'm in the same boat and cashed in my personal brokerage account and now thinking about 401k. Are you planning to keep the govt bonds to maturity? I wouldn't think there is much risk in that, if the USA stops paying those, we will have bigger problems. I never understood bond funds as a "safe" investment when interest rates are low and the bond fund options in my 401k plan are not very good, so only have a 1.21% guaranteed option.

I am moving to bond funds, not individual bonds. And won't get a large return, but I'd rather give up returns and feel safer than get the returns for the time being and always worry when things will crash.

[406]

^^^you might want to look at what makes up those funds (target date and %%%) and what would happen if rates go up. Might be better off in a guaranteed interest option.

[Bromontana]

Peak drawdown on 20yr USTs is 18.5% in the last year, fyi.

[4matic]

Watch your duration and holdings.

Depending on time frame I don't mind bond funds because they maintain duration, liquidity, and sell for you. I own pimco total return. Yields around 3% with 5 year duration. It's good in a deferred account. Bond funds are typically not tax friendly because you might have gains to pay on.

[bigdude2468]

Decade Average Return Per year
1900s 9.96%
1910s 4.20%
1920s 14.95%
1930s -0.63%
1940s 8.72%
1950s 19.28%
1960s 7.78%
1970s 5.82%
1980s 17.57%
1990s 18.17%
2000s 1.07%
2010-2013 16.74%

January 1 1900 through 2016 the compound annual growth rate of the S&P 500 was 9.71%. Average annual return would be about 2% higher.


I am not making any investment recommendation or suggesting a S&P 500 ETF is better than active management. Just pointing out that as the market soars everybody is a genius.

I am not fully invested in equities, have cash and bonds also. However, fighting the tape can be a losing proposition. Does not mean you don't pare back some holdings.

[Bromontana]

Small caps breaking out again the last few sessions.

[Toadman]

When's the next 1/4 point bump? Seems like bonds are pricing it into the equation already.

[Brock Landers]

March. Fed could also announce a slowdown in mbs paydown reinvestment sometime this year

[bigdude2468]

When's the next 1/4 point bump? Seems like bonds are pricing it into the equation already.

Talking heads on CNBC this morning said the market has priced in three 1/4 point hikes in 2017

[4matic]

Trouble for Trump is generally bullish for stocks. All the cuts with none of the fat. Wall Street goes crazy. JPM to $100.

In my view the fed can get it wrong and invert the yield curve just like 2007. Yellen playing dangerous game with forward transparency.

Interest rate spreads are important. Duration curve is used in currency and central bank planning. China and Japan have been selling treasury largely due to curve formulas and currency. Not because they don't like trump.

IMO yield spread reversion is one of the bigger risks.

"the spread between benchmark Treasury bond yields and the yields on junk bonds has fallen to about 400 basis points from more than 800 basis points about a year ago. Additionally, that same article shows that the yield on corporate bonds with ratings of triple-C-plus or lower has fallen toward 10%. That same class of bonds was yielding nearly 22% in early 2016. As junk bonds are really a hybrid security -- that is, part bond and part equity -- investors are buying into a dramatic economic improvement in the coming years."

[4matic]

Feb 2007 yields. Greenspan flailing trying to slow real estate prices:

Treasury bills

3-month
5.16%

6-month
5.16%

Treasury notes/bonds

2-year
4.93%

3-year
4.83%

5-year
4.80%

10-year
4.81%

30-year
4.89%

Inverted yield curve may no longer be sign of recession

http://usatoday30.usatoday.com/money...rve-usat_x.htm

[iceman]

I saw a thing today that confidently predicted Dow 50,000 within 3 years. So I'm in.

wait no I'm not

well kinda

[Mazderati]

Feb 2007 yields. Greenspan flailing trying to slow real estate prices:

Treasury bills

3-month
5.16%

6-month
5.16%

Treasury notes/bonds

2-year
4.93%

3-year
4.83%

5-year
4.80%

10-year
4.81%

30-year
4.89%

Inverted yield curve may no longer be sign of recession

http://usatoday30.usatoday.com/money...rve-usat_x.htm

From the article:

Stock traders have been betting that the Fed would start lowering rates as the economy slows, making the yield curve less inverted. Most economists now think the Fed won't cut rates until late this year, if at all. But that's better than the other way the curve could return to normal: a jump in long-term bond rates.

This would seem to counter talk of the Fed raising rates multiple times throughout the year. Although the author prefaces expected rate raises with a slowing economy.

[4matic]

Today on Bloomberg:

"The curve is woefully underpriced"

The Market May Be Guilty of Gambler's Fallacy on Fed Rate Hikes
http://bloom.bg/2lODQ3e

[4matic]

This would seem to counter talk of the Fed raising rates multiple times throughout the year. Although the author prefaces expected rate raises with a slowing economy.

Exactly. Market daring fed to raise rates. More risk of stagflation too. Especially food prices:

Trump's Immigration Crackdown Triggers Anxiety Across U.S. Farms
http://bloom.bg/2lgXxUf

[iceman]

"past performance is no guarantee of future results"

I'm becoming what I hate, a market timer. I'm not qualified for it. That's a job a I shouldn't have...but it's going up, right? Can't bail now, right?

(shoots self in head)

[bigdude2468]

^^^you might want to look at what makes up those funds (target date and %%%) and what would happen if rates go up. Might be better off in a guaranteed interest option.

I agree unless the bond funds are short term. Owning individual bonds is not a bad thing and it offers the protection of worst case you hold the bonds to maturity. For example I have a couple of corporate bonds, GE, Goldman that both reach maturity in 2025. They pay 4.65% & 5% and currently are priced above par. I bought them for the dividend and have no intention of selling them before maturity.

[panchosdad]

cliff notes:

- eventually blows up and reverts once failure is experienced among the herd

Would someone please tell me before this happens?

[4matic]

10Y Treasury rates at important level of 2.30%. It gapped down on the daily chart to daily/weekly/monthly support. A gap down on Monday and we get to 2.10% in a hurry.