Although the markets have been turbulent in recent months, and most still languish below where they started this year, many analysts have been surprised by how relatively sanguine the market response to really, really crazy economic policy has been.
Indeed, a couple of times it has appeared that when Trump starts a fire and puts it out again, the market rebounds beyond where it started, which clearly shouldn’t happen in an efficient market (yes, no market is perfect, but still, it’s particularly odd).
I’ve seen discussion that a lot of this is due to the ease of stock trading now, that means there are lots of short-term speculators trying to “buy the dip” i.e. buying a declining stock hoping to get it just before a rebound. And that this behaviour basically acts as a backstop limiting how low stocks can go. Or maybe it just sets us up for a more precipitous drop when all the “buy the dip” people lose so much confidence that they sell the stocks they just bought?
I dunno…I might be typing a whole bunch of garbage. I’m a noob to this stuff.
Panic selling is usually bad for the seller and maybe people are finally getting the message.
Trump’s current BS will pass and the markets will correct as needed and in all over the next 10 years the markets will rise. If you’re on a fixed income, you should be in more stable investments and most are.
Ah crap, I missed that there is an Investment general discussion thread that covers some of these thoughts.
Mods, feel free to delete if you don’t think this is a distinct enough topic.
And the DOW is down a tiny percentage, about 100. The Nasdaq is down a little more. But yes, languish is a too strong off a word for the current situation.
By “languish” I meant more in terms of time, rather than depth. The long-term market trend is of growth, and indeed the markets have grown steadily in recent years.
Versus now, sure, the markets have regained basically all of the losses from liberation day, but it still ends up equivalent to 5-6 months of plateau, which would be pretty bad in itself.
When I had the present house appraised around about five years ago, I was astonished and delighted that its value had tripled in the roughly ten years I had been living here. I had not been following real estate prices and this was a wonderful surprise.
But I then thought to look at what would have happened if I had decided to rent and invest the same funds in an index fund tied to the S&P 500 over that same period. No, it would not have done better, it would have been somewhat significantly short of that benchmark, but it was much closer to that remarkable benchmark than I would ever have imagined. A well diversified stock portfolio – and you can’t get more diversified than an index fund – typically provides really remarkable returns compared to typical money market funds.
You just have to be responsible and conservative about it and not give in to temptations about “sure things” and leveraging margin accounts and puts and calls. That’s gambling, and that way lies madness and bankruptcy.
But you didn’t pay cash for the house, I assume. I made a relatively small down payment and have a very low interest loan and the interest is a tax write off. I pay significantly less per month than I would be paying in rent now. I’m way better off having bought a house (as well as investing in index funds with my retirement accounts)
Exactly, though I hate debt, so despite the low interest rate I got, I still put down 75%, but that was my own weird quirk and not the wisest investment strategy.
A big part of my investments are Index funds. They have been for a while now, once I got old enough to start pulling out of mutuals and individual stocks. What stocks I have left, are mostly Blue Chippers with high Dividend Yields.
It is the reason I still have a mortgage at all. At least twice a year I almost talk myself into paying it off, but at 2.625% that would actually be dumb.
Including improvements, the house is still worth 20% more than I’ve paid/paying for it and that is after only 4 years and 4 months. Also not including the value of the improvements, which might drive it up to 25-30% more. Meanwhile, I’m not paying rent and my taxes, insurance and mortgage are about as cheap a 1 bedroom apartment in this area.
I had still basically pocketed a little money from the sale of the prior house. I just wish I could figure out if I’m going to be here for a few more years or until I’m old enough to need assisted living. So I have done things like solar panels this time.
The “stock market” is shorthand for a range that contains multitudes. The Dow is 30 cherrypicked stocks that kicks out poor performers for good new ones so that the trend is ever upward. The S&P 500 at least contains a majority of the largest corporations. The NASDAQ is tech stocks, a world unto their own. The Russell 2000 is comprised of stocks from companies with small market caps. The Wilshire 5000 is the closest to what’s colloquially the “stock market” because it tracks every publicly traded stock in the U.S. But because of mergers there aren’t 5000 any more, but closer to 3000. It’s down 3% since Trump’s inauguration.
All of them tend to track one another to a remarkable degree, admittedly. And all tend to go up over time, which is why stocks are always suggested as the best long-term investment. Nevertheless, stagnant periods are frequent and long. The S&P 500 took two full years (January 2024) to match the post-COVID high it reached in 2022. Even the lowest low after “Liberation Day” was 7% higher than that. The highest high was 27%. It’ll return to that soon, barring another spectacular idiocy in the White House.
Unless your a speculator, never look at months, but concentrate on years.
One thing I always keep in mind, as a counter to the by-and-hold and long-term strategies is the great depression.
The market famously crashed in October, 1929. The S&P 500 did not return to the pre-crash high until 1955. Even if you go back to early 1929 or 1928, the S&P 500 briefly reached those levels in 1937 and 1946, but did not stay above the 1928 level until 1954.
That is an awfully long time to hold and just wait for it to come back.
Admittedly the great depression was caused and perpetuated by a whole bunch of things that don’t apply now. The point is though, there is nothing magical about the stock market that says it always has to go up for any decade(s) long interval.
If you really do think we are headed for a complete economic meltdown, that will change the very nature of the US economy, then getting out is the right move. Obviously hindsight is the only way to know if that view is right, but such is the nature of investing in the stock market.
Q: How long did the Japanese Nikkei 225 stock market take to regain it’s peak of 1989?(when Japan was riding high, the real estate in all of Japan the size of California was worth more than the US, and was the “Japan that can say no?”)
A: 34 years (in nominal terms)
Q: How long did it take for the US stock market to regain the peak of Black Tuesday, 1929?
A: 25 years (in nominal terms)
Trump 1.0 was a disaster for anyone (like myself) that sold all stocks and waited out the market. A lot of people and some fund managers that I know from back when I was in the biz in the 1990s believe that Trump will cave when the market crashes. He’s paused for 90 days.
Markets go up “forever” until a black swan event occurs. Is this a blip or a swan?
Tariffs are going to be higher at end of trump 2.0 than they are now
Inflation will be higher
interest rates will be higher
Uncertainty is going to negatively impact investments in the US
Unemployment will go higher
US as THE SAFE HAVEN and USD as the defacto currency is going to decline long term. How much? Who knows? Could be 2 percentage points, could be 20. Pretty straightforward that torpedoing the post WW2 construct means there will permanently be less foreign money in the US.
The front running and insider trading of the US stock markets combined with gelding the regulatory and enforcement bureaus will reduce confidence in the markets and reduce investment
Is the USD and treasuries backed by the full faith and credit of the US Government? And does that give a comfort level in the age of Trump, who just might say those specific $600B treasuries held by the Chinese government are now toilet paper?
Market volatility is that of a small emerging market