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Nowhere near as bad as ‘07-‘09 - Yet

hank
edited October 2022 in Other Investing
According to Bloomberg the S&P is now down 21.44% YTD. The NASDAQ is off a bit over 29% over that period. According to Wikipedia, from late 2007 until March 2009 the S&P lost about 50% of its value. In truth, the ‘07-‘09 bear market was much longer than the current one. Precious metals miners bucked the down trend today. Not sure if this is the start of a p/m bull market, but quite interesting. By all accounts, Friday’s Payrolls numbers release is a major mover to keep an eye on.

Wikipedia 2007-09 Bear Market

Comments

  • CrashCrash
    quite right. I recall the dark days of '08-'09 and the recovery period. I was throwing $600/month into EM bonds. Did very well. I was too stupid to know how foolish that was, back then.
  • hank
    Interesting WSJ article from a couple days ago (October 5): “Markets Are Stuck in Overreaction Mode” by James Mackintosh. I won’t attempt to quote any of it. But maybe some have access to the WSJ or might find another accessible source.

    I think Mackintosh is correct as far as he goes with this short article. His premise is that relatively insignificant bits and pieces of financial news (earnings reports, FedSpeak, payroll numbers, etc.) are eliciting outsized reactions by investors. This accounts for the massive daily swings in the major indexes of the past few weeks. I’d take it a step further. I glean from various reports (mostly Bloomberg) that a lot of folks are doubling down on their bets and piling into one side or the other. Large amounts have poured into inverse funds (like SPDN) in recent months and some are even using inverse 3X funds! So when markets move / adjust to new reports, the swings can be enormous.

    Where does this all come down? Likely a goodly overshoot on the downside before it’s over. By the same token, there should be some very attractive valuations at some point for those with the patience and long enough time horizons. In the meantime - Buckle Up.
  • catch22catch22
    Inflation, eh? Let us consider. Federal government monetary stimulus that was needed to help stabilize a very damaged economy (Covid); large demand/spending by the consumer, post Covid (expected, yes!), supply chain damage, Putin's war and China on the freak out when their vaccine can't control Covid spread. And more.....
    Ya, these things can and do cause inflation...Econ. 101.

    Ah, a fix. Blow the hell out of interest rates. That will take care of these clowns (the public) who keep spending money. Wait till they find what we do to mortgage rates and auto loans........and everything else connected to borrowing.
    They'll discover we can fix anything economic.

    Yu think they have the fire trucks on standby; when things get out of control, an overshoot; when enough folks lose their work and all that is related to that, for the economy.

    One may hope they (Fed.) are the smartest kids on the block; whether one agrees or not, they have the power/control.

    Unlikely to be very pretty, economically happy time going forward for many; and then the gears will again change (QE) direction. I've never enjoyed riding a roller coaster at a theme park; and I don't care much for the economic ones either.

    Will Fed actions cause rents to move downward or free up the supply chain woes; or reduce crude oil prices and related gasoline prices....don't think so.

    Lest you think that I'm not empathetic, I am. All of this affects everyone I know, including yours truly.

    The games, the humans play.

    Burn the house down mode.....

    All aboard the Fed. train
  • rforno
    edited October 2022
    Unlike 2008 and the GFC, I don't have that 'existential sense of dread' that the system was in real danger of coming apart at the seams and that the very fabric of the world economic system was failing. This seems, I think, to be a more 'normal' sort of bad economic times -- at least for the moment. Could that change since the world has gotten used to essentially free money and cheap debt? Perhaps. But I'm keeping my eye on the long-term, mostly buying, and certainly not panicking.

    Interesting tidbit: BBG guest (CIO from MS, IIRC) this morning said that existing long-term home mortgages were averaging 3.X% fixed and corporations had refinanced much of their debt over the past several years so she thought both were in 'decent' shape these days. We'll see.
  • LewisBraham
    I would say the risk of a major implosion from rising rates this time is to a different part of the economy than 2008:
    https://forbes.com/sites/mayrarodriguezvalladares/2022/09/26/probability-of-default-is-rising-for-high-yield-bonds-and-leveraged-loans/amp/
    In 2008, it was housing as many home buyers borrowed with floating rate loans. I don’t get the impression that is true today. What has happened is a tremendous expansion in the leveraged loan floating rate market and corporate credit in general. That is more where the risk is today as rates rise. If defaults tick up, the question is does it infect other parts of the economy like housing did in 2008? Certainly, there will be job loss from defaults.
  • yogibearbullyogibearbull
    Only those who didn't need money got great rates on loans. For many others, credit market has been tight and is becoming tighter.
  • LewisBraham
    edited October 2022
    I disagree that only those who didn’t need money got low rate loans:
    https://spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/high-yield-bond-and-leveraged-loan-sales-top-1-trillion-in-2021-67670013
    For investors as opposed to the economy—two very different things in 2022–I would say this represents a major fault line: https://spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/covenant-lite-deals-exceed-90-of-leveraged-loan-issuance-setting-new-high-66935148
  • LewisBraham
    edited October 2022
    …..
  • rforno
    edited October 2022
    LewisBraham said:

    I disagree that only those who didn’t need money got low rate loans:
    https://spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/high-yield-bond-and-leveraged-loan-sales-top-1-trillion-in-2021-67670013
    For investors as opposed to the economy—two very different things in 2022–I would say this represents a major fault line: https://spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/covenant-lite-deals-exceed-90-of-leveraged-loan-issuance-setting-new-high-66935148

    Wait....is 'covenant-lite' loans essentially a modified version of NINJA loans? Yikes, they never learn, do they.
  • davfordavfor
    It's been my expectation the stock market retreat would bottom somewhere close to it's current level. But, the Fed waited for something to break in a major way before beginning to raise rates. Perhaps it will wait for something (what?) to break in a major way before easing up on their rate increases. Or, perhaps Russia will decide to go nuclear. If so, a 40%+ decline may be on the horizon. I moved about 3% from cash into stocks in late spring but have just been watching since then. The year-end distribution from my investment account has been mostly set aside. But, making a full annual distribution is not a done deal yet....

    Tracking the Coming Economic Storm
  • hank
    edited October 2022
    Some incredible destruction of wealth taking place. TROW @$106 is off over 45% YTD as well as for 1 year. ISTM not long ago that one was thought a “safe” long term hold suitable for Grandma. (Grandma may need to get a job.)

    Fed’s plan appears to be - Make us all poorer so we can’t buy as much. Than everyone will be better off.
  • carew388carew388
    Still hanging in with TROW-of course, since I only own 4 shares, I can easily tolerate the price declines. Maybe if it gets below $100 a share I'll make a massive purchase of 1 additional share !
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