I’m surprised that the stock markets aren’t anticipating a recession in the next few months. Everything Trump/Musk are doing should cause a reduction in economic activity: firing lots of workers, reducing government spending, tariffs. Combined with the things that will cause inflation and we should get a return of stagflation, something we haven’t had since the 70s.
Things on my bingo card:
unfavorable labor report
firings at the Bureau of Labor Statistics†
dramatic Consumer Price Index increase
more firings at BLS†
negative GDP report
firings at the Bureau of Economic Analysis†
Fed raises interest rates to combat inflation
Trump attempts to take over Fed (he’s already made noises about this)
†Shooting the messengers. Then install people who will produce favorable numbers, despite what the actual numbers are.
I happen to speak to my Merrill Lynch broker yesterday and he said while he expects ups and down throughout the year, overall their expectation is still continued growth. I have no idea what that’s based on, or whether he’s delusional, but I’m not going to pull out because a recession may be in the offing. I’ve gone through a few recessions in the past and have always come out ahead in the long run.
Reduced regulations may help short-term corporate and banking profits for a while (until the inevitable meltdown). Also, Wall Street still doesn’t really think he’ll follow through on all the insane stuff he’s promising. But, in addition to reduced regulations, he’s also promising reduced corporate taxes, and probably other tax changes that would benefit shareholders. Just because Main Street is hurting, or the country is headed towards autocracy, doesn’t mean corporate profits will take a hit.
In 2007, the fixed income market froze up. It seemed like the end of the world, but the stock market kept going until 2008, when Wile E Coyote finally looked down. Maybe that’s our situation now.
I’ve seen interviews with experts in NYT and WaPo saying that Musk and DOGE aren’t going to accomplish much to help the deficit because their cuts amount to spitting into the wind. That probably isn’t going to result in a recession.
The return to mercantilism might, if all the tariff sticks.
Same thing my Julius Bär broker said to me two weeks ago. I remain sceptic, but I am not pulling out of the stock market either. For now. But I am watching.
One always hopes to pull out at the right moment, though market timing does not work. But if it does not work you may just as well stay invested.
Shorting a small bet against Tesla though. One more triumph of hope against experience.
This. I think it depends on how risk adverse you are is and whether you will need the money in the near term.
If worry is causing you to lose sleep at night, or if you are planning to use the money in the next few years, take it out of the market and put is someplace safe, otherwise, wait and see what happens. I don’t believe anyone can time the market, not even Warren Buffett can, and he’s a lot better at making money than any of us are.
Another thought that crossed my mind is the question of who moves the markets. As the most important stock markets with the highest capitalization are in the USA, which is also the richest nation on Earth, and knowing that a very small proportion of people hold most of the wealth, and considering that those multi-billionaires are purportedly set to gain the most (at least in the short(-sighted)) term, from the temper tanTrump’s economic policies, what do you think they are doing? Holding and, in so far as they still have any liquidity left and are not fully invested anyway, or if they can leverage more than they already do, buying. That moves the markets, not our sentiment, yours, mine and anyone else’s that we probably know, not even in large numbers.
When and if the mega-rich loose faith in the temper tanTrump that we are witnessing I will think about timing the market, i.e. getting the fuck out. And when and if I do, the mega-rich will have been faster. The best we hoi polloi can expect to do then will be to cut our losses.
Another variable that props the stock market up is the fact that there are no secure investments anymore. Not if you want a performance that at least beats the possible inflation in the near future (YMMV). So you stay invested in the statistically more lucrative, if riskier stock market.
And I know that the recession the OP asked about is not only measured by the performance of the stock market, but the temper tanTrump gives that parameter an inordinate importance.
The threat of tariffs and continuing inflation is posing a real risk of driving the economy into the shitter. Trump is doing about as much to bring down the oft-lamented price of eggs as he is to bringing a fast and equitable end to the war in Ukraine as he promised to do “in one day, even before being sworn in”. He is, however, regularly playing golf while Musk dismantles the federal government.
He’s protected by a thick layer of blubber. I always marvel at how fat he really is. There was a picture of him recently alongside some woman that he was appointing as Secretary of something, and he looked like he could easily outweigh two of her, maybe three. His gigantic fat head alone must weigh about a hundred pounds, though virtually none of it is brain matter.
Trump economic collapse is more like it, not just a recession.
It does, actually. But the business “elite” is ideologically devoted to the belief that the common workers and employees are worthless parasites (every accusation is a confession on the Right, as they say). Which means they ignore that ordinary people are what powers the economic engine both as workers and consumers, and have a pattern of sabotaging themselves because of that belief.
So they’ll walk right of the Trump economic cliff, sure the whole time it’s a flat road.
The market is highly irrational. Look at Tesla stock. It’s always had an insane valuation, it’s being priced like the company is 20 times more important than it really was. And then Elon musk publically declares her love for Hitler and white supremacy and sales start taking a massive hit in Europe, his brand is tarnished, people are spray painting cybertrucks – surely that stock price that’s based on the unlimited potential growth of Tesla has to take a huge dive, right? No, it keeps on trucking because it’s not actually based on anything sane.
Besides, I think at a certain level of absolutely crushing wealth inequality, the rich like the occasional recession. It’s not going to hurt their lifestyle, they’re unfathomably rich. They’re completely insulated from the real effects of a recession. But what it does is make buying up everything even cheaper, so they use their assets to buy post-recession stock and own even more of the wealth when it eventually rebounds.
When/if Trump actually implements tariffs instead of just threatening them may be when it all starts to tumble, but who knows. None of it makes any fucking sense anyway. I can’t wait to hear the term “Biden recession” 5000 times though.
That presumes that it will rebound, which it won’t under the conditions Trump is creating. And it will affect their lifestyle eventually, that’s why they don’t all move to the Third World countries that are run along the lines they like.
But they’ll never admit it, especially to themselves.
Having worked on the derivates/institutional sales desk of UBS, Lehman’s and Nikko through most of the 90’s, brokers are always bullish. There are no retail profits to be made (and annual bonus) by forecasting and advising that markets will be flat, or going down, or a recession is coming. The whole retail investment community mantra is “you have to be in it to win it”, long term returns are proven, and buy something so I make a commission (and when later another commission when you sell that and buy another stock). It’s an inherent bias.
Trump said inflation is back but it isn’t his fault:
Well, I guess that makes it okay then. Just blame the previous guy and no one can complain. If the previous guy leaves a bunch of economic landmines for you, oh well. Too bad.
If Trump can’t fix the inflation, he should step aside and let Biden be President again. If he created the inflation (while not even in office any longer!) he can certainly fix it. ETA: the rest of Trump’s life.
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