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What will you buy if the U.S. defaults on its debt and equity markets fall 10% or more?

edited May 16 in Other Investing
With all the uncertainty about the debt limit and potential impact a default would have on equities I thought I’d toss this out for fun. U.S. stocks might get hammered hardest. But many global markets would probably also be sent reeling. U.S. bonds are owned by foreign governments and investors as well. Assuming there’s a silver lining somewhere in all this, what would you buy?

Not sure what I’d do.

- Commodities have been in a funk for awhile. If they fell further I’d sink some $$ there.

- Maybe just “cop-out” and spread a sum equally among the several different multi-asset / alternative funds I own. In effect, let the managers deal with it.

Comments

  • Think the defaulting will accelerate the pace of recession and things will get ugly. I will buy bonds of all types as the FED will cut rates quickly. Bond prices will go up while stocks and commodities will be in red.
  • With so much bearishness in the short-term outlook, not expecting it to happen.

    But if the market does pull back by double-digits, I would be buying a bit of everything. Keeping it simple....priorities in order:

    1) S&P Index ETF (setup Limit orders).
    2) Balanced/allocation funds to get some debt exposure (FBALX, FMSDX).
    3) Add to SCHD (again, via Limit orders).
    4) Maybe scoop up some beaten down sector ETFs.

  • Equities.

    For the taxable, looking at new positions in SPGP, RWJ, SYLD, and RWK. Might choose FMIMX over RWK. I'm still looking a midcaps. Then adding to SCHD, PEY, and CSB. In sectors, maybe new positions in PSCC, GRID, EVX, and FIW and adding to TDV and CSGZX. I have more cash in the taxable.

    Still thinking about the IRA. Would probably add equally to VWELX, VWINX, PRWCX, GLFOX, FSMEX, FSUTX, PSCC, IYK, PRBLX, VDIGX, RWJ, and SYLD. Nothing new there. And not a lot of room to maneuver until I get rid of a few things.

    Great question @hank.
  • Depending on the degree of market drop, I might increase equity ETFs like CGGO, CGDV and/or AVGE. @Sven may be on to another idea with bond funds that I didn't think about. I don't think I would go the commodity route because industrial demand would drop. Problem for me would be that most of my cash is tied up in treasuries and CDs over the next 1-12 months.
  • FXAIX (Fidelity S&P500 fund), FTEC (tech ETF), OMFL, FSELX and filling out my position in GOOGL. Amounts will vary with the degree damage
  • qqq, vong
  • I would add to CGGO (thanks to @MikeM) and MOAT.

    FWIIW, the Capital Group continues to roll out active ETFs, both equity and fixed income, that have a seeming chance of doing well. CGGO, CGDV and CGXU certainly have performed well during their short lives, although I can't judge the FI funds.

  • Thanks, @BenWP, but I surely can't take credit for finding the Capital Group ETFs. I first became aware earlier this year, maybe by rforno(?)
  • If the "scholars" on the Hill settle the US Debt issue within the next week, could we see a +10% equities market RALLY instead? Stocks have been holding the line, and volatility is still low.

    Not many folks out there are forecasting an early summer rally, but I would not be at all surprised.
  • @JD_co

    You could be absolutely right regarding a relief rally upon an agreement.

    Biden, McCarthy and McConnell all making comments directly or alluding to the fact that a default is off the table. Actually, it doesn't seem as though the stock markets have been all that concerned about a default possibility. Even after today the S&P 500 is still up over 8.5% YTD.
  • edited May 23
    JD_co said:

    If the "scholars" on the Hill settle the US Debt issue within the next week, could we see a +10% equities market RALLY instead? Stocks have been holding the line, and volatility is still low. Not many folks out there are forecasting an early summer rally, but I would not be at all surprised.

    Let’s hope the “rally” doesn’t amount to a Wile E. Coyote moment. Could be a case of “sell the news”

  • What will I buy? Some more high-end single malt scotch.

    ... and equitiies on my shopping list that may plunge in value to fire-sale prices if/when/as the markets respond to the abject delusive insanity emanating from the idiots across the river from me.
  • hank said:


    Let’s hope the “rally” doesn’t amount to a Wile E. Coyote moment. Could be a case of “sell the news”

    GOOD POINT!

    Watch the markets pop higher on *any* news of a deal. If it's a short-term deal, 30-day delay, or other punting, I would expect a pop higher that's completely driven by the algos followed by a retracement down (or down hard) hours later once reality sets in and human traders get involved having had time to contemplate things. In which case, after things settle within 24-48 hours, expect more of the same chop until the next decision point is announced.

    If it's a permanent deal, I think the market goes higher in a straightforward but perhaps accellerated / maniacal fashion that might be good for a swing trade at least.

  • "Permanent" DC deal may be a debt-ceiling to some 2024 post-election day. And then, this fiasco will begin all over again.

    One of the sticking point in the current negotiations is that there seems agreement for extension to some pre-election date (longer than 30-days) but not to 2024 post-election date.

    A true permanent solution would be future balanced budgets, or making the debt-ceiling an integral part of the deficit budgets, i.e. , no pork-barrel/Christmas-tree deficit budgets without an appropriate increase in the debt-ceiling to keep all on the same page.
  • "
    A true permanent solution would be future balanced budgets, or making the debt-ceiling an integral part of the deficit budgets, i.e. , no pork-barrel/Christmas-tree deficit budgets without an appropriate increase in the debt-ceiling to keep all on the same page.

    And on that glorious day, cancer will be cured, world hunger/poverty will be eliminated, humanity will agree to start working for its own betterment instead of profit, and unicorns will prance freely around the National Mall....

  • edited May 24
    If sp500 go to 3300 I will load all margins sell my house and put everything in spy Iwm eem Tsla tqqq

    They say maybe 10% drop next few wks/large corrections

    Get ready
  • johnN said:

    If sp500 go to 3300 I will load all margins sell my house and put everything in spy Iwm eem Tsla tqqq

    They say maybe 10% drop next few wks/large corrections

    Get ready

    My gameplan:

    10% down I will nibble as appropriate. (IMO such a move is hardly worth getting excited over.)

    20% down I will buy in larger quantities.

    30% down I will buy aggressively.

    nb: not buying indices, buying individual stocks for the long-term


  • Yogi said: "A true permanent solution would be future balanced budgets, or making the debt-ceiling an integral part of the deficit budgets, i.e. , no pork-barrel/Christmas-tree deficit budgets without an appropriate increase in the debt-ceiling to keep all on the same page."

    Absolutely right!
  • edited May 24
    rforno said:

    And on that glorious day, cancer will be cured, world hunger/poverty will be eliminated, humanity will agree to start working for its own betterment instead of profit, and unicorns will prance freely around the National Mall....

    That’s called Rainbow Stew

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