Market Sentiment - Recession Length

[marko]

Market decline is much more worrisome if you are living off your investments.

But if you planned well that should not be a big deal either. These things shall pass.

Agree. Realizing that "hope is not a strategy", I'm hoping that my dividends will carry me through this rough patch as they did in '08. MF Cap Gains will likely dry up this year however. Thankfully, last year's CGs were huge and we should have a hefty surplus going into '23

 

[Markola]

It’s never fun to watch markets plunge but I’ve tried to learn about myself from the last big one. I was in my early 40s in 2009 and talked myself into the logic of moving from 100% equities to 80/20. It seemed smart. Of course, the stock market slowly started recovering just after my flinch.

This time, we are in our late 50s and have most of our assets under management with a dedicated Vanguard advisor, who worked out with us a fixed allocation of a 50/50, globally-diversified portfolio of index funds, plus we have home equity and other property. We are aiming to take full SS in 11 and 14 years, respectively. We still both earn some income. The extent of my prognostication skill is that I trust that some of the above will zig while others zag.

While markets were strong we took Mr. J.P. Morgan’s sage advice and sold stocks “down to the sleeping point.” I’m sleeping well with a multi-decade horizon, knowing that we’re as diversified as we can be and that my hands are off the tiller. It works for me while DW just wants to know “we’re OK.” I can’t promise her that, of course, but I know I’m more OK knowing that she has a trusted advisor relationship to help her navigate our finances if I get hit by a bus.

This is what I’ve evolved to after 30 years of working, saving and investing. Good luck to OP and everyone with your own strategies through whatever this wild period ends up being.

PS It’s always wild in global financial markets but the world’s workforce will keep waking up and going to work every day, earning and spending, so markets will always recover.

 

[Koolau]

It’s never fun to watch markets plunge but I’ve tried to learn about myself from the last big one. I was in my early 40s in 2009 and talked myself into the logic of moving from 100% equities to 80/20. It seemed smart. Of course, the stock market slowly started recovering just after my flinch.

This time, we are in our late 50s and have most of our assets under management with a dedicated Vanguard advisor, who worked out with us a fixed allocation of a 50/50, globally-diversified portfolio of index funds, plus we have home equity and other property. We are aiming to take full SS in 11 and 14 years, respectively. We still both earn some income. While markets were strong we took Mr. J.P. Morgan’s sage advice and sold “down to the sleeping point.” I’m sleeping well with a multi-decade horizon, knowing that we’re as diversified as we can be and that my hands are off the tiller. It works for me while DW just wants to know “we’re OK.”

Good luck to OP and everyone with your own strategies through whatever this wild period ends up being.

PS It’s always wild in global markets.

Now in my 70s, I feel as if I've seen it all before - at least I hope it's "not different this time." I guess we'll see as YMMV.

 

[yakers]

During recessions it is much easier to find and hire qualified tradespeople for home projects.

By that definition we are definitely not in a recession right now.

 

[daylatedollarshort]

By that definition we are definitely not in a recession right now.

We have been getting bids for insulation and the contractors are all readily available. They've even been a bit pushy about getting the work and when can we let them know our decision. I've never had insulation bids before, so I don't know if that is a quirk in that particular field or a sign of changing times. I have to think mortgage rates going to 7% has slowed the amount of fix up work that usually occurs when people are selling and buying new homes, plus the number of home improvement loans. Home sales are down 17% here. I read the price of lumber has dropped nationwide.

 

[aja8888]

We have been getting bids for insulation and the contractors are all readily available. They've been even a pushy about getting the work and when can we let them know our decision. I've never had insulation bids before, so I don't know if that is a quirk in that particular field or a sign of changing times. I have to think mortgage rates going to 7% has slowed the amount of fix up work that usually occurs when people are selling and buying new homes, plus the number of home improvement loans. Home sales are down 17% here. I read the price of lumber has dropped nationwide.

We have had independent contractors knocking on our door the last few weeks asking if we needed tree trimming work, etc, etc. It looks like the "shortage" of available workers is over around here.

 

[FLJim]

I keep saying it because that’s what the data says. If the NBER calls it a recession, I’ll be proven wrong and admit to it. Otherwise, with strong employment, consumer demand and business investment, we’re in a growth environment.

Employment is a lagging indicator but hiring is not, and hiring is strong. Retail sales are a great leading indicator for recession and right now they are strong.

Inventory adjustments are probably the reason for the irregular GDP numbers, and that may continue thought the summer.

The recession will not be "announced" until after the mid-term elections.

 

[MichaelB]

The recession will not be "announced" until after the mid-term elections.

The NBER determines when the US is in recession. It is a private not for profit organization that has no political involvement. Elections have no bearing on their pronouncements.

The National Bureau of Economic Research is governed by a Board of Directors consisting of 51 members from leading North American research universities, economics professional organizations, and the business and labor communities. The board chair, vice-chair, and past-chair are John Lipsky, Peter Blair Henry, and Karen Horn, respectively. Board member James Poterba is the president and chief executive officer. Robert Mednick is the treasurer.

 

[luckydude]

We have had independent contractors knocking on our door the last few weeks asking if we needed tree trimming work, etc, etc. It looks like the "shortage" of available workers is over around here.

Those guys might be crypto or meme stock bros looking for a real job now...

 

[aja8888]

Those guys might be crypto or meme stock bros looking for a real job now...

 

[rodi]

Yes it is. There are a lot of people who say they’re “buy and hold”. Times like this are when that’s tested.

There's a time to hold em, a time to fold em....

And there's a time to rebalance and stay the course.

 

[NW-Bound]

It's always the time to do whatever one feels like doing with his own money.

Including BTD.

 

[NW-Bound]

Now in my 70s, I feel as if I've seen it all before - at least I hope it's "not different this time." I guess we'll see as YMMV.

Most likely not different. Just as scary is enough excitement.

 

[Koolau]

During recessions it is much easier to find and hire qualified tradespeople for home projects.

By that definition we are definitely not in a recession right now.

It can all turn so quickly too. Toward end of last recession, there was a guy at church who mentioned he'd been out of w*rk for months. He could do anything (not just a handyman - construction, roofing, plumbing, painting, tile, etc.) We didn't know his work so we tried him on replacing a door (to make it 36" into bath room.) He did a fantastic job, quick and inexpensive - even gave us a church discount . so we had him do everything we'd thought of to do and some we hadn't. He leveled our concrete floors (expensive goop that you pour and it leaves a smooth surface.) Then he tiled the entire apartment. He did some needed plumbing, fixed some broken furniture, fixed some sliding doors, on and on. We had him for the better part of 2 months.

As soon as he was done, he got another j*b and w*rked steadily from then on. We had to beg him to come back for a couple of day jobs we encountered.

Going back the other way, will likely be just as sudden. One day, there are no w*rkmen available and the next, they're all out of w*rk. I've seen it more than just this one time. It's sort of like an avalanche. Something triggers, and then there's no stopping it. I look for that soon though I hope it doesn't happen. YMMV

 

[Koolau]

Most likely not different. Just as scary is enough excitement.

Honestly, if it isn't any different than the worst (Stagflation of the late '70s/early 80's) I don't think I'll be scared. Not only have I seen it before, but I no longer am worried about a j*b. I should have enough to weather any previous storms. My plan is now less than 30 years - 24 years gets me to 99. I think I'm golden FIRECalc wise. Now Black Swans? Always at the back of my mind. YMMV

 

[audreyh1]

During recessions it is much easier to find and hire qualified tradespeople for home projects.

Plus leisure travel costs usually go down as tourism usually drops significantly.

 

[audreyh1]

I believe that oil prices (really it is energy as a whole) are a bigger effect than many in government recognize. Until the cost of energy comes down, the interest rates have only partial ability to lower inflation.

Cost of energy affects everything. Prices keep going up in a cycle until the price of energy stops increasing. Current government policy is restrictive to bringing the price of oil down; while at the same time no real cost effective or readily available substitute alternative is in place.

I always saw higher energy prices as an effective economy slowing pressure, reducing demand.

The Fed actually has to be careful raising interest rates in the face of rising oil prices. That combination probably brought on the 2000-2001 recession.

Look at a 5 year chart of the DOW or S&P500. What I see is us giving back a lot of excess rise since Jan 1 2020. And things had been appreciating prior to that but really took off after the pandemic panic.

We’re not far from that Jan 2020 level, although of course it can go lower.

Note that we’ve already seen the yield curve flatten and even invert a bit with the 5yr rate being higher than the 10 year and 30 year. The 2 year is trying to catch up to the 5 year. All are above 3%.

 

[daylatedollarshort]

We have had independent contractors knocking on our door the last few weeks asking if we needed tree trimming work, etc, etc. It looks like the "shortage" of available workers is over around here.

Maybe the slow down is starting with housing and then has to work its way to other sectors. There are still help wanted signs at the stores and restaurants here. But I have noticed on the entertainment front there are more deals. Like more seat filler and discount tickets. A band we like that had $36 tickets at a local venue is down to $11 with a Facebook coupon. Ticketmaster has had a 50% off coupon on Groupon lately. One of the big concert venues was even giving away free tickets to locals. That could be due to infection rates going back up, a sign of people cutting back or both.

 

[madatrub]

The NBER determines when the US is in recession. It is a private not for profit organization that has no political involvement. Elections have no bearing on their pronouncements.

To be fair, if you look at the party affiliations of the "Groups" you mentioned, it is no doubt politicized.

e.g.

 

[Helen]

^^^Careful^^^

 

[MichaelB]

Insisting on bringing partisan politics into this discussion will only lead to the thread being closed.

It is possible to have an informed discussion without getting political. It’s also desirable, so let’s all please join the effort.

 

[24601NoMore]

The US economy is not in a recession. The economy declined slightly in 1Q, is flat so far in Q2, but employment and spending are healthy and show no sign of recession.

Not technically in a recession YET. But Q1 was -1.4% and the Atlanta Fed is projecting..ZERO POINT ZERO for Q2 as of this past Friday.

We're as close to being "in" a recession as you can get without being in one. Even a tiny little tick (literally -0.1%) south of the current estimate for Q2, and we'll be in one.

I'd say the odds are VERY high we'll have less than -0.1% growth in Q2. Bankable, in fact.

ETA: it annoys me no end that we have certain members of the Fed and politicians trying to jawbone and tell us "the economy is in GREAT shape". No, it's not. Go look at consumer credit card debt. Housing starts. Layoffs starting. This economy is in BIG, BIG trouble. And many of the problems (like rampaging inflation) could have been easily avoided by better management of it. The next 2-3 years are likely to be absolutely brutal for markets and the economy in general.

 

[FLJim]

Not technically in a recession YET. But Q1 was -1.4% and the Atlanta Fed is projecting..ZERO POINT ZERO for Q2 as of this past Friday.

We're as close to being "in" a recession as you can get without being in one. Even a tiny little tick (literally -0.1%) south of the current estimate for Q2, and we'll be in one.

I'd say the odds are VERY high we'll have less than -0.1% growth in Q2. Bankable, in fact.

ETA: it annoys me no end that we have certain members of the Fed and politicians trying to jawbone and tell us "the economy is in GREAT shape". No, it's not. Go look at consumer credit card debt. Housing starts. Layoffs starting. This economy is in BIG, BIG trouble. And many of the problems (like rampaging inflation) could have been easily avoided by better management of it. The next 2-3 years are likely to be absolutely brutal for markets and the economy in general.

+1

 

[24601NoMore]

I keep saying it because that’s what the data says. If the NBER calls it a recession, I’ll be proven wrong and admit to it. Otherwise, with strong employment, consumer demand and business investment, we’re in a growth environment.

NBER is known to lag by ~12-18 months as it takes that long for them to get all of the data and analyze to a point they "formally" announce a recession. So if you're waiting for NBER to announce it, you're likely going to be quite a bit behind the curve and in a recession for roughly a year before they get around to their formal proclamation. That's at least what's happened every time previously.

It's easy to know when we're in a recession..two consecutive quarters of negative GDP is a recession.

We won't need NBER to tell us that as the data is readily available to all..

And I wouldn't get too comfortable about consumer demand as it's weakening significantly. (Remember that sentiment is measured by dollars, not volume..so an increase in dollars when inflation is raging is misleading as much of the 'increase' is inflationary - not demand side, which would only show in volume - not dollars). And consumer demand is about to get a LOT worse with the 30 year mortgage rates going over 6.5% and gas at $5 or more average nationally. Hard to keep demand high when many people can't afford gas, housing or food.

 

[copyright1997reloaded]

I've also mentioned to MichaelB several times regarding employment as a lagging indicator.

In the great recession, unemployment hit a low in May of 2007 at 4.4%. The NBER eventually declared the recession starting in Dec 2007 with a bottom in June 2009. In Dec 2007 the unemployment rate was still a low 5.0%. It did not peak until Oct 2009 @ 10.0%, and remained above the 5.0% rate until December 2015.

It is a useless indicator in terms of predicting when we've entered a recession (or exit for that matter).