Author Topic: '23 Predictions... & how are you changing your investment plans to reflect them?  (Read 9072 times)

jeroly

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I'm thinking about 2023 a fair bit these days, it being the end of the year and whatnot.  What are y'all thinking?
Here are some of my thoughts:

- I expect interest rates to continue to rise through the year (to higher than 5.1%) and plan to move to higher-duration fixed income investments starting around Q423 from my current heavy money market weighting.

- I expect the crazily overvalued stuff like meme stocks, NFT apes, BTC, TSLA, and the like to continue to come down to earth.  Since the S&P has been fluffed up by a lot of crap like that I expect the S&P to continue to drag but value could start to gain - it's been hurt a lot less than the market overall in 2022. I plan to keep my overweight position in megacap value for that reason rather than to continue to reduce it to market weight as had been my plan at the beginning of this year.  Not planning to change my AA - I am using a 'reverse glidepath' approach wherein I try to take withdrawals from the FI portion (and from dividends & interest) of my portfolio and mostly let the equities do their thing. S&P 2023 prediction:  down 5% including dividends, to around 3600.

- At some point soon, if my economic assumptions of no-to-mild-recession and higher interest rates come to fruition, the financials should start to outperform.  I may increase my weighting of these to mildly overweight (maybe 2-3% of NW into VFH).

- I will continue to throw $10k into I-bonds annually.  I could live on my inflation-adjusted SS plus an inflation-adjusted $10k (comfortably so in fact, provided I relocated to an LCOL area in the US - or very comfortably, if I relocate to Asia), so this seems like an adequate level of 'insurance' for age 80 and onwards, after adding in an allocation for end-of-life care.

- I will 'just say no' to real estate as I see property values falling for the next couple of years.  I recently sold two of my three rental properties in Florida and am under contract to sell the third next month.  (The timing of the sales was unrelated to my view on the RE market's and more specific to my properties' current values reaching my target sales prices.) I will continue to rent my primary residence.

- While I don't see a coming surge in non-US equities, for diversification purposes, I will continue to add to my international weighting.  Currently, it's about 15% of equities, split between total non-US and non-US smallcaps.  I plan to add about 2.5% to that early in the year, and would like it to grow to 33% of equities over time - perhaps over the next five or six years.

vand

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- We will finish 2023 higher than we started it
- However it may well include having to visit new lows between now and then
- The initial wave of inflation to have subsided and gradual disinflation to continue throughout the year and annualised inflation rate to fall to 3-3.5% in most developed countries
- Residential real estate will be the biggest loser in 2023. Not predicting a GFC style meltdown, but a lot of global housing markets are overpriced in the new economic paradigm and will continue the readjustment that has just got underway
- Emerging markets to outperform as USD weakness provides a strong tailwind
- Bond stem the blood loss but no real big rebound. Those days are long gone

- I think that the generally held consensus of a shallow recession priced in is wrong - either we will avoid recession altogether (most likely), or we will start a very deep one (smaller but significant probability) - if the latter then revise all previous predictions about other markets down.

- Just as the story of the last 12 months has been about inflation, spiking interest rates and falling real wages, I think it will move on in 2023 to one of stagnation and rising unemployment

clarkfan1979

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I'm thinking about 2023 a fair bit these days, it being the end of the year and whatnot.  What are y'all thinking?
Here are some of my thoughts:

- I expect interest rates to continue to rise through the year (to higher than 5.1%) and plan to move to higher-duration fixed income investments starting around Q423 from my current heavy money market weighting.

- I expect the crazily overvalued stuff like meme stocks, NFT apes, BTC, TSLA, and the like to continue to come down to earth.  Since the S&P has been fluffed up by a lot of crap like that I expect the S&P to continue to drag but value could start to gain - it's been hurt a lot less than the market overall in 2022. I plan to keep my overweight position in megacap value for that reason rather than to continue to reduce it to market weight as had been my plan at the beginning of this year.  Not planning to change my AA - I am using a 'reverse glidepath' approach wherein I try to take withdrawals from the FI portion (and from dividends & interest) of my portfolio and mostly let the equities do their thing. S&P 2023 prediction:  down 5% including dividends, to around 3600.

- At some point soon, if my economic assumptions of no-to-mild-recession and higher interest rates come to fruition, the financials should start to outperform.  I may increase my weighting of these to mildly overweight (maybe 2-3% of NW into VFH).

- I will continue to throw $10k into I-bonds annually.  I could live on my inflation-adjusted SS plus an inflation-adjusted $10k (comfortably so in fact, provided I relocated to an LCOL area in the US - or very comfortably, if I relocate to Asia), so this seems like an adequate level of 'insurance' for age 80 and onwards, after adding in an allocation for end-of-life care.

- I will 'just say no' to real estate as I see property values falling for the next couple of years.  I recently sold two of my three rental properties in Florida and am under contract to sell the third next month.  (The timing of the sales was unrelated to my view on the RE market's and more specific to my properties' current values reaching my target sales prices.) I will continue to rent my primary residence.

- While I don't see a coming surge in non-US equities, for diversification purposes, I will continue to add to my international weighting.  Currently, it's about 15% of equities, split between total non-US and non-US smallcaps.  I plan to add about 2.5% to that early in the year, and would like it to grow to 33% of equities over time - perhaps over the next five or six years.

I will 'just say no' to real estate as I see property values falling for the next couple of years.  I recently sold two of my three rental properties in Florida and am under contract to sell the third next month.  (The timing of the sales was unrelated to my view on the RE market's and more specific to my properties' current values reaching my target sales prices.) I will continue to rent my primary residence.

I'm keeping my 3 rentals (4 doors) through 2023. Rent continues to climb and I throw the extra cash flow into VTSAX. The mortgage rates are 3.5%, 4,5% and 4.875%, so I think they set up well for a long-term buy and hold.

I like to keep rentals where everything is built out and land is scarce. Two of my rentals easily meet this criteria. I'm undecided if my 3rd rental meets this criteria. It's located in Fort Myers, FL in the neighborhood of San Carlos Park. I got a great deal on it in January 2012 for 95K. It's now worth 350K to 375K. I always envisioned selling it at some point because I view it as a "normal rental" It looks like prices were normalizing in 2019 around 250K. But then COVID-19 happened and it shot up to 350K. More recently, Hurricane Ian happened. The house is 3 miles inland and there is no damage. Houses closer to the water were damaged and now there is a housing shortage. Rent increased dramatically, but I'm not sure if its a long term trend. It will be interesting to see what happens with median house sales prices January through April in 2023.

I'm a little short on cash at the moment to purchase another rental, but I'm considering buying a vacation rental near Breckenridge, CO. It would party due to personal reasons (I like to snowboard) and part investment. In a perfect world, I'm looking for a good house in a great location with a bad operator. I'm looking for a turn key vacation rental that is not currently doing well because the owner does not like being an operator of a vacation rental or is just bad at it or maybe a little bit of both. In a perfect world, I could "assume the mortgage" if they have a rate less than 4%.

When the stock market is down, I get personal emotional enjoyment from throwing extra money into VTSAX. As long as the S&P 500 is below 4,000, I will continue to enjoy throwing extra money into VTSAX in 2023.
 


sisto

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I've shifted towards CD's again with the nice 4+% rates. Working on some laddering instead of sitting on lots of cash. Also iBonds.

nereo

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We’re “steady as she goes”. We have an IPS with a carefully considered  AA. Not changing course to try to outsmart the markets.

RWTL

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My crystal ball....

1. Inflation drops to around 3-4 by year end.
2. Fed hikes rates to 5 - 5.5 and maintains through the year
3. More reports of job cuts or hiring freezes
4. Volatility continues in the S&P 500 throughout the year but posts a moderate gain 3-8%
5. Some prices will fall faster than others.  Demand levels out while some supply is overstocked.
6. Housing prices decline in general - especially on the higher end.  Low price homes and rental stay the same or increase in price.


I'm at approx 60/40 allocation right now with a retirement date coming up in May.  No plans to change for now and will start to slowing shift to 80/20 once I retire. 
« Last Edit: December 26, 2022, 03:12:38 PM by RWTL »

JAYSLOL

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No crystal ball here, I’m going to just keep doing what I’ve been doing for years, 100% stock index funds.  If it drops another 25%, cool, if it goes back up to new highs, that’s cool too, don’t plan to change anything

RWD

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We’re “steady as she goes”. We have an IPS with a carefully considered  AA. Not changing course to try to outsmart the markets.
This.

Metalcat

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I've given it zero thought and don't really intend to.

ATtiny85

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Since besides the tax implications the flipping of the calendar to a new year is arbitrary, I don’t think in those terms too much. But now that I have thought about, I realize my investing plan for 2023 was set in something like 2000 when I first had a 401k. Dump as much as I can into the market.

Predictions? Surely will be some natural and unnatural events that cause some upheaval. But I predict a tad smoother, with return to reality.

Silrossi46

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Other than adding 45,000 to my 457b instead of 41,000…..not changing much else. 

JAYSLOL

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Other than adding 45,000 to my 457b instead of 41,000…..not changing much else.

This, also planning to increase contributions to retirement accounts by about 10% for 2023

MustacheAndaHalf

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The Feds numerous mistakes will continue in 2023.  They may not call inflation transitory, nor predict it will be gone in 6 months (Dec 2021) or predict unemployment will not rise at all (summer 2022)... but they will make mistakes.

Speaking of mistakes, the thread title is "'23 Predictions... & how are you changing your investment plans", and yet look at all the replies with no predictions and no change of investment plans.


We’re “steady as she goes”. We have an IPS with a carefully considered  AA. Not changing course to try to outsmart the markets.

No crystal ball here, I’m going to just keep doing what I’ve been doing for years, 100% stock index funds.  If it drops another 25%, cool, if it goes back up to new highs, that’s cool too, don’t plan to change anything

We’re “steady as she goes”. We have an IPS with a carefully considered  AA. Not changing course to try to outsmart the markets.
This.

I've given it zero thought and don't really intend to.

Metalcat

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The Feds numerous mistakes will continue in 2023.  They may not call inflation transitory, nor predict it will be gone in 6 months (Dec 2021) or predict unemployment will not rise at all (summer 2022)... but they will make mistakes.

Speaking of mistakes, the thread title is "'23 Predictions... & how are you changing your investment plans", and yet look at all the replies with no predictions and no change of investment plans.

I don't understand your point.

Also, you don't know what our investment strategies are, so how can you say they're a mistake??

nereo

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Speaking of mistakes, the thread title is "'23 Predictions... & how are you changing your investment plans", and yet look at all the replies with no predictions and no change of investment plans.


We’re “steady as she goes”. We have an IPS with a carefully considered  AA. Not changing course to try to outsmart the markets.

(Snip)


Yup.  For a bit more detail - over the years I’ve learned that I’m not very good at predicting major events that will happen 3-12 months down the road in global/national sphere, and so we’ve set our AA and IPS to be resilient and robust for our savings goals and tolerance.  For example, I severely underestimated the degree of inflation we’d see in 2021-2022, but we recognized years ago inflation could happen (sometime) and set our finances accordingly. Lo and behold, it’s a strategy which worked out pretty darn well.
Looking back over the years, I also predicted a bunch of things that never came to pass (e.g. high inflation in 2010-2014; a recession in 2018/19), that I would “never get an interest rate this low again” as the one I got for 3.5% in 2012. All were reasonable and widely held ideas, and all turned out to be wrong. 

So: i don’t “change my investment plans” to account for my predictions, even though i have them, because it’s much easier for me to build an investment strategy that can do well over a wide variety of situations than to correctly predict what will happen in a world I can not control.

If you really want predictions, here’s a few of mine:
  • Inflation will drop to 5% by year’s end
  • The fed will raise rates another 1.25%-1.5%
  • Our household income will grow by 12%
  • supply chain disruptions will get worse this winter before they get better next summer, largely because of China
  • unemployment will slowly rise to around 4.5%
  • I will be wrong about at least two of these things

ATtiny85

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Speaking of mistakes, the thread title is "'23 Predictions... & how are you changing your investment plans", and yet look at all the replies with no predictions and no change of investment plans.

The signal to noise ratio of some posters….well it’s obvious some just puke on threads to hear themselves type.

Another small prediction: our household income will not see a real increase, but our portfolio will.

waltworks

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I'm a little short on cash at the moment to purchase another rental, but I'm considering buying a vacation rental near Breckenridge, CO. It would party due to personal reasons (I like to snowboard) and part investment. In a perfect world, I'm looking for a good house in a great location with a bad operator. I'm looking for a turn key vacation rental that is not currently doing well because the owner does not like being an operator of a vacation rental or is just bad at it or maybe a little bit of both. In a perfect world, I could "assume the mortgage" if they have a rate less than 4%.

Just be aware the short term rental license no longer transfers with the property - you'll have to re-apply for one, and the wait time (there's now a hard cap) is VERY long as the current number of extant licenses exceeds the cap by quite a bit and there are a few hundred properties on the list.

There will be great deals in Breck at some point soon, you just won't be able to nightly rental them. I think we're going to leave after this year as the community has thinned out to the point where it's not really a town anymore. But for vacations, it's still super fun.

-W

JAYSLOL

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The Feds numerous mistakes will continue in 2023.  They may not call inflation transitory, nor predict it will be gone in 6 months (Dec 2021) or predict unemployment will not rise at all (summer 2022)... but they will make mistakes.

Speaking of mistakes, the thread title is "'23 Predictions... & how are you changing your investment plans", and yet look at all the replies with no predictions and no change of investment plans.

I don't understand your point.


+1

The Answer “I have no predictions and plan to change nothing” IS still a valid answer to the question, and can add value to the discussion in the form of giving the op and others reading a balanced view of the wide range of strategies and beliefs people around here have.  I don’t think every thread should be an echo chamber of only supporting views. 

Travis

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Will be going through a dramatic change in living conditions and income next summer. Maxing IRAs and 401K as soon as possible. Everything else after is play by ear.

2sk22

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It's now two years since I retired but my wife plans to keep working and will not retire in 2023. As such, we are not going to make any real changes in our investment strategy. I follow a pure Boglehead approach to investing and its served us well for many years so no reason to change.

However, there is a big event looming: I have a very large amount of money coming next month as my share of my parents' estate. I plan to use this as an opportunity to do some rebalancing of our after-tax assets.

ATtiny85

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The Feds numerous mistakes will continue in 2023.  They may not call inflation transitory, nor predict it will be gone in 6 months (Dec 2021) or predict unemployment will not rise at all (summer 2022)... but they will make mistakes.

Speaking of mistakes, the thread title is "'23 Predictions... & how are you changing your investment plans", and yet look at all the replies with no predictions and no change of investment plans.

I don't understand your point.


+1

The Answer “I have no predictions and plan to change nothing” IS still a valid answer to the question, and can add value to the discussion in the form of giving the op and others reading a balanced view of the wide range of strategies and beliefs people around here have.  I don’t think every thread should be an echo chamber of only supporting views.

-1. Your text in quotes is barely, oh, never mind. It’s just noise, and doesn’t matter.

Another prediction is that i-bonds will cool way off and we will see a lot questions around cashing them out after a year. That’s more of a hope for me to prevent my bad feelings about not being able to get a TD account without a bank signature, and I have no local bank and am too lazy to find somewhere to get one. So into VTSAX it all has gone, which is fine for now.

Financial.Velociraptor

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I'm befuddled.

Fed is probably going to keep raising rates (you know because they tell us exactly their plan v. publicly).  Inflation is starting to get under control and I think the Fed has tools in this inflation cycle it didn't for Volcker.  Especially the overnight repo arrangement.  Fed can crowd out demand for available credit in a freaking hurry these days instead of having a long and variable lag.  I see inflation (by way of PCE measurement) normalizing to 2% target "sooner" compared to prior inflationary cycles.

Recession?  The history says rate hikes are highly correlated to bear markets and recessions and no bear market in the last 70s years has ended without the Fed LOWERING rates.  But consumer sentiment remains strong and the various surveys of market expectations show all time or near all time high expectations for recession and market declines.  Sounds like a clear contrarian flag to me!  And really, isn't the nature of recession that it essentially MUST happen when no one thinks it can?  If the people in halls of power are all scared and putting on hedges, doesn't that ensure a break-evenish scenario?  So, my PREDICTION for this thread is there will be either very mild and short recession or none at all, e.g. Fed negotiates a 'soft landing'. 

Short term, I expect a hell of a lot more volatility and declining indexes, (we are still in a fear and uncertainty part of market psychology cycle) but a meager gain on the full calendar year for S&P as tech bros, APEs, and weak hands capitulate.  Tech to come closer to earth and classic value plays and defensive sectors to finally shine after decades of under-performance to growth strategies. 

How am I changing my strategy?  The core strategy to trade around charts with core of portfolio to accumulate more fixed income remains intact with profits above budget needs.  Just fine tuning around the edges.  That's the whole point of the strategy, add passive income during up and down markets!  Short term, I'm going about 60% of my trades bearish.  This week, I opened a mostly in the money (one dollar of strike OTM, 4 ITM) Bear Put Spread on SPY.  If it finishes below 381 on the 20th, I'll more than double my money.  Mark to market as of this writing, it is up 63.3% or 924% annualized.  V.strong chance I will close early for 85-90% of max gain to take risk off the table if it makes a strong favorable move well before expiry. 

Long bets for next 180 days to be in Finance, Real Estate, Insurance, and Energy sectors.  Individual tickers chosen on ticker by ticker basis based on TA of 50/200/300 Day MA, volume analysis, and deeply informed by RSI.  Take profits early when things go well and don't risk the trade turning sour while waiting for last 10-15 cents per share (bird in hand!)

Neutral feelings on gold and crypto.  Will not be adding.  May take profits on rallies.

V. uncertain on ag commodities.  A lot of Ukranian grain isn't going to make it to market.  Fertilizer and ag chemicals likely to be supply chain constrained for the planting cycle.   But this has been a "known" for months and the likes of ADM and other big ag will be hedged.   In my "too hard" pile.


vand

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I'm befuddled.

Fed is probably going to keep raising rates (you know because they tell us exactly their plan v. publicly).  Inflation is starting to get under control and I think the Fed has tools in this inflation cycle it didn't for Volcker.  Especially the overnight repo arrangement.  Fed can crowd out demand for available credit in a freaking hurry these days instead of having a long and variable lag.  I see inflation (by way of PCE measurement) normalizing to 2% target "sooner" compared to prior inflationary cycles.

Recession?  The history says rate hikes are highly correlated to bear markets and recessions and no bear market in the last 70s years has ended without the Fed LOWERING rates.  But consumer sentiment remains strong and the various surveys of market expectations show all time or near all time high expectations for recession and market declines.  Sounds like a clear contrarian flag to me!  And really, isn't the nature of recession that it essentially MUST happen when no one thinks it can?  If the people in halls of power are all scared and putting on hedges, doesn't that ensure a break-evenish scenario?  So, my PREDICTION for this thread is there will be either very mild and short recession or none at all, e.g. Fed negotiates a 'soft landing'. 

Short term, I expect a hell of a lot more volatility and declining indexes, (we are still in a fear and uncertainty part of market psychology cycle) but a meager gain on the full calendar year for S&P as tech bros, APEs, and weak hands capitulate.  Tech to come closer to earth and classic value plays and defensive sectors to finally shine after decades of under-performance to growth strategies. 

How am I changing my strategy?  The core strategy to trade around charts with core of portfolio to accumulate more fixed income remains intact with profits above budget needs.  Just fine tuning around the edges.  That's the whole point of the strategy, add passive income during up and down markets!  Short term, I'm going about 60% of my trades bearish.  This week, I opened a mostly in the money (one dollar of strike OTM, 4 ITM) Bear Put Spread on SPY.  If it finishes below 381 on the 20th, I'll more than double my money.  Mark to market as of this writing, it is up 63.3% or 924% annualized.  V.strong chance I will close early for 85-90% of max gain to take risk off the table if it makes a strong favorable move well before expiry. 

Long bets for next 180 days to be in Finance, Real Estate, Insurance, and Energy sectors.  Individual tickers chosen on ticker by ticker basis based on TA of 50/200/300 Day MA, volume analysis, and deeply informed by RSI.  Take profits early when things go well and don't risk the trade turning sour while waiting for last 10-15 cents per share (bird in hand!)

Neutral feelings on gold and crypto.  Will not be adding.  May take profits on rallies.

V. uncertain on ag commodities.  A lot of Ukranian grain isn't going to make it to market.  Fertilizer and ag chemicals likely to be supply chain constrained for the planting cycle.   But this has been a "known" for months and the likes of ADM and other big ag will be hedged.   In my "too hard" pile.

As I said above, I think the contrarian position to the general consensus is much worse recession than expected rather than no recession, just as the contrarian macro position that in fact proved correct with hindsight was inflation that was worse and carries on for longer than any mainstream analyst forecasts.


Don't laugh, but I like the setup for precious metals here.  Having negeotiated a tricky 2022 without too much technical damage, sentiment wise they have reached contrarian status where people aren't so much bearish on them so much as completely ignorant of them.  Of course I would say that, as I remain very overweight in the sector.

achvfi

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No precise predictions from me. But my gut tells me we will get soft landing more or less and market will do better than all the gloom and doom estimates  out there.

I am so glad to see all the bubbles popping these days. Yay!!

Crypto.
NFTs.
Meme stocks  - TSLA, GME, AMC.
Growth stocks.
Cooling Home prices.

At the end of 2021 I came to conclusion I need to diversify my portfolio beyond growth  oriented market indices. Luckily I  timed  it  perfectly to choose a more diversified  index portfolio just before the correction.

Now my portfolio is a matrix of

large  and small
Growth and value
US, international  and  emerging markets
Tiny sliver  of bonds  and Cash.

I am not changing plans in 2023.  My portfolio is meant for long  term.

waltworks

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My dream scenario is continued doldrums (or a crash) for stocks right when my iBonds stop earning a decent amount and I can cash 'em out for a minimal penalty.

At 6.8 I'll let them sit, but I'm guessing they'll adjust WAY down in May.

-W

MustacheAndaHalf

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The Feds numerous mistakes will continue in 2023.  They may not call inflation transitory, nor predict it will be gone in 6 months (Dec 2021) or predict unemployment will not rise at all (summer 2022)... but they will make mistakes.

Speaking of mistakes, the thread title is "'23 Predictions... & how are you changing your investment plans", and yet look at all the replies with no predictions and no change of investment plans.

I don't understand your point.

Also, you don't know what our investment strategies are, so how can you say they're a mistake??
In a thread asking for predictions and investment changes, you had nothing to say.  And yet you felt your doing nothing was so newsworthy that you had to post it!  You made the thread so much about you, that you couldn't just say nothing - you had to tell others you had nothing to say!

I've given it zero thought and don't really intend to.

Metalcat

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The Feds numerous mistakes will continue in 2023.  They may not call inflation transitory, nor predict it will be gone in 6 months (Dec 2021) or predict unemployment will not rise at all (summer 2022)... but they will make mistakes.

Speaking of mistakes, the thread title is "'23 Predictions... & how are you changing your investment plans", and yet look at all the replies with no predictions and no change of investment plans.

I don't understand your point.

Also, you don't know what our investment strategies are, so how can you say they're a mistake??
In a thread asking for predictions and investment changes, you had nothing to say.  And yet you felt your doing nothing was so newsworthy that you had to post it!  You made the thread so much about you, that you couldn't just say nothing - you had to tell others you had nothing to say!

I've given it zero thought and don't really intend to.

Isn't buy and hold investing a common approach here? That's basically what I'm saying. I buy, I hold, I don't think much more about it.

It was asked what our predictions are and what changes we plan to make so I answered the question, and I don't anticipate seeing anything significantly different to do next year, not in my particular circumstances.

How is that a mistake??

MustacheAndaHalf

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Fed is probably going to keep raising rates (you know because they tell us exactly their plan v. publicly).  Inflation is starting to get under control and I think the Fed has tools in this inflation cycle it didn't for Volcker.  Especially the overnight repo arrangement.  Fed can crowd out demand for available credit in a freaking hurry these days instead of having a long and variable lag.  I see inflation (by way of PCE measurement) normalizing to 2% target "sooner" compared to prior inflationary cycles.
When I look at this St Louis Fed graph, I don't see any activity in overnight repo.  Do you have a different set of data showing the usage and impact are dramatic?
https://fred.stlouisfed.org/series/RPONTSYD


Recession?  The history says rate hikes are highly correlated to bear markets and recessions and no bear market in the last 70s years has ended without the Fed LOWERING rates.  But consumer sentiment remains strong and the various surveys of market expectations show all time or near all time high expectations for recession and market declines.  Sounds like a clear contrarian flag to me!  And really, isn't the nature of recession that it essentially MUST happen when no one thinks it can?  If the people in halls of power are all scared and putting on hedges, doesn't that ensure a break-evenish scenario?  So, my PREDICTION for this thread is there will be either very mild and short recession or none at all, e.g. Fed negotiates a 'soft landing'. 
Historically rising rates and Fed tigthtening (meaning QT or open market actions) have lead to recession 7 of 7 times.  I'm investing in recession as the more likely scenario based on historical data.

I've heard 2009-2019 called the longest bull market in history, and I would argue the S&P 500 doubling from 2019-2021 is part of that bull market.  You can also see it in bankruptcy rates, which stayed the same in 2020 and fell in 2021.  I would argue the business cycle demands a bear market, to clear out the zombie companies that have existed on free money for years.

You could be right about the contrarian sentiment, as the market expects recession in Q1/Q2 of 2023.  But what if that recession is delayed?  Several past recessions took longer than the market currently expects (17, 18, 22 months), which would put recession in 2023 Q4 give or take a month.  I haven't been following analyst predictions recently, but I know Credit Suise has an equity strategist with this view as well - a delayed recession, meaning avoid defensive stocks a bit longer.

This would perfectly spoil everyone's views - including mine.  I have some profitable put options that expire in 6 months, others than expire in 2 years.  I might need to shift my investments to longer term, to wait for a delayed recession.  It's also likely earnings come in lower than expected, so there's hope for 2023 Q1 disappointment.

I also predict this 1% fall in CPI every 2 months will not last.  Everyone expects inflation to fall rapidly, and I think that is true to a limit.  Some expect 2% within 12 months, and I think consensus is 3-4%.  The last study I read followed Fed officials and market watchers, and found their record of tracking inflation was terrible.  You could actually beat them by assuming inflation would the be same as it is now.  Following that theory, I should expect inflation closer to 7% than to 3.5% ... meaning I should predict inflation over 5% by the end of 2023.

Wage growth is accelerating.  In the next 3 months I expect wage growth to climb above falling CPI-U inflation.  Many workers have felt screwed for decades, and now unemployment is the lowest in 50 years - they finally have the upper hand against corporations.  Between real wages being negative for the past year, and past sentiment, I expect wages keep rising through 2023.  That, in turn, will put upward pressure on inflation, and keep it from falling rapidly back to 3%.

vand

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It's also worth asking ourselves "what can go wrong in 2023?"

I don't think anyone has mentioned this, but the Biden administration is currently tapping the strategic petroleum reserve to the tune of 1mmb per day.  At this rate it will run dry within the year and then the extra demand will have to be absorbed into the markets. Perhaps too if Russian oil supplies are completely shut off this could push energy prices right back through the roof and trigger another surge in inflation. 

Metalcat

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It's also worth asking ourselves "what can go wrong in 2023?"

I don't think anyone has mentioned this, but the Biden administration is currently tapping the strategic petroleum reserve to the tune of 1mmb per day.  At this rate it will run dry within the year and then the extra demand will have to be absorbed into the markets. Perhaps too if Russian oil supplies are completely shut off this could push energy prices right back through the roof and trigger another surge in inflation.

Honest question: how would that change your investing strategy?

I'm not American so I have different concerns, but I have 3 variable mortgages that have sky rocketed, so I'll be highly affected by inflation in 2023. But I don't have an investment strategy to respond to that.

former player

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One very easy prediction is that the financial, environmental and human effects of climate change are going to get worse in 2023.  Unfortunately I don't know of any financial investment plans that can successfully reflect this.

My personal investment plan for dealing with it: live in one of the most climate sustainable parts of my country, invest further in finishing renovating my house with additional insulation and two independent heating sources (electricity and wood stoves), build an additional retaining wall in my steep garden to guard against landslips and use the new terrace to expand my productive garden.

jeroly

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The Feds numerous mistakes will continue in 2023.  They may not call inflation transitory, nor predict it will be gone in 6 months (Dec 2021) or predict unemployment will not rise at all (summer 2022)... but they will make mistakes.

Speaking of mistakes, the thread title is "'23 Predictions... & how are you changing your investment plans", and yet look at all the replies with no predictions and no change of investment plans.

I don't understand your point.

Also, you don't know what our investment strategies are, so how can you say they're a mistake??
In a thread asking for predictions and investment changes, you had nothing to say.  And yet you felt your doing nothing was so newsworthy that you had to post it!  You made the thread so much about you, that you couldn't just say nothing - you had to tell others you had nothing to say!

I've given it zero thought and don't really intend to.

Isn't buy and hold investing a common approach here? That's basically what I'm saying. I buy, I hold, I don't think much more about it.

It was asked what our predictions are and what changes we plan to make so I answered the question, and I don't anticipate seeing anything significantly different to do next year, not in my particular circumstances.

How is that a mistake??
OP here...

I'm actually glad that Malcat and others have added their two cents on this despite not making investment plan changes based on their '23 predictions.  If they didn't post here, we'd just get a skewed subset of members posting to this about changes, rather than a healthy subset of 'stay the course'-rs reminding us all of the value of keeping a steady hand at the wheel even when seas are rough.

I'd argue that when you see an iceberg in your direct path, keeping on the same path isn't adviseable.  I see an 'iceberg' of longer lasting high interest rates, going up to higher levels, than is generally predicted.  That's why I am going to stay out of real estate and long duration debt, and throw a little extra into a sector that I think will outperform in those circumstances (financials). 

But others either don't see that iceberg, or see other, bigger, icebergs in all the other directions, and think that changing course has just as many if not more risks. 

I'm staying in the market, and not changing my equities/fixed allocation, so this is perhaps more along the lines of a mild steering manoeuver rather than a 180 degree turn.

Of course, seeing an iceberg is different than thinking you see an iceberg... and there are lots of fake icebergs on the ocean of investments.


Metalcat

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The Feds numerous mistakes will continue in 2023.  They may not call inflation transitory, nor predict it will be gone in 6 months (Dec 2021) or predict unemployment will not rise at all (summer 2022)... but they will make mistakes.

Speaking of mistakes, the thread title is "'23 Predictions... & how are you changing your investment plans", and yet look at all the replies with no predictions and no change of investment plans.

I don't understand your point.

Also, you don't know what our investment strategies are, so how can you say they're a mistake??
In a thread asking for predictions and investment changes, you had nothing to say.  And yet you felt your doing nothing was so newsworthy that you had to post it!  You made the thread so much about you, that you couldn't just say nothing - you had to tell others you had nothing to say!

I've given it zero thought and don't really intend to.

Isn't buy and hold investing a common approach here? That's basically what I'm saying. I buy, I hold, I don't think much more about it.

It was asked what our predictions are and what changes we plan to make so I answered the question, and I don't anticipate seeing anything significantly different to do next year, not in my particular circumstances.

How is that a mistake??
OP here...

I'm actually glad that Malcat and others have added their two cents on this despite not making investment plan changes based on their '23 predictions.  If they didn't post here, we'd just get a skewed subset of members posting to this about changes, rather than a healthy subset of 'stay the course'-rs reminding us all of the value of keeping a steady hand at the wheel even when seas are rough.

I'd argue that when you see an iceberg in your direct path, keeping on the same path isn't adviseable.  I see an 'iceberg' of longer lasting high interest rates, going up to higher levels, than is generally predicted.  That's why I am going to stay out of real estate and long duration debt, and throw a little extra into a sector that I think will outperform in those circumstances (financials). 

But others either don't see that iceberg, or see other, bigger, icebergs in all the other directions, and think that changing course has just as many if not more risks. 

I'm staying in the market, and not changing my equities/fixed allocation, so this is perhaps more along the lines of a mild steering manoeuver rather than a 180 degree turn.

Of course, seeing an iceberg is different than thinking you see an iceberg... and there are lots of fake icebergs on the ocean of investments.

Yeah, and it depends on your circumstances what different icebergs mean for you.

It's not that I don't see the inflation, I do, I just don't have a predictable financial pivot to make beyond what I've already done. In personally investing right now in ways to increase income, but I started this plan last year in response to what I saw as concerning economic uncertainty.

jeroly

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My dream scenario is continued doldrums (or a crash) for stocks right when my iBonds stop earning a decent amount and I can cash 'em out for a minimal penalty.

At 6.8 I'll let them sit, but I'm guessing they'll adjust WAY down in May.

-W
I don't really understand this perspective.  I buy I-bonds for inflation protection, not for current yield.  They only 'stop earning a decent amount' when inflation drops - and 'decent amount' really only seems relevant in their context when compared to inflation, so in my perspective they always do earn a decent amount.

Moreover, there are penalties if you sell within five years.  Since in this scenario you are selling when they stop earning a decent amount, you are foregoing three months interest as a penalty when the interest rate was 'decent.' Doesn't really seem that minimal of a penalty... on a $10k bond paying say 8%, you're looking at a $200 charge.

waltworks

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My dream scenario is continued doldrums (or a crash) for stocks right when my iBonds stop earning a decent amount and I can cash 'em out for a minimal penalty.

At 6.8 I'll let them sit, but I'm guessing they'll adjust WAY down in May.

-W
I don't really understand this perspective.  I buy I-bonds for inflation protection, not for current yield.  They only 'stop earning a decent amount' when inflation drops - and 'decent amount' really only seems relevant in their context when compared to inflation, so in my perspective they always do earn a decent amount.

Moreover, there are penalties if you sell within five years.  Since in this scenario you are selling when they stop earning a decent amount, you are foregoing three months interest as a penalty when the interest rate was 'decent.' Doesn't really seem that minimal of a penalty... on a $10k bond paying say 8%, you're looking at a $200 charge.

You forgo the last 3 months of interest, so if they drop to 3% or whatever, you're looking at negligible amounts.

I think of them as a great inflation protected emergency fund/dry powder. A way to keep a cash reserve without the penalty of holding actual cash. Nothing more.

-W

achvfi

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The Feds numerous mistakes will continue in 2023.  They may not call inflation transitory, nor predict it will be gone in 6 months (Dec 2021) or predict unemployment will not rise at all (summer 2022)... but they will make mistakes.

Speaking of mistakes, the thread title is "'23 Predictions... & how are you changing your investment plans", and yet look at all the replies with no predictions and no change of investment plans.

I don't understand your point.

Also, you don't know what our investment strategies are, so how can you say they're a mistake??
In a thread asking for predictions and investment changes, you had nothing to say.  And yet you felt your doing nothing was so newsworthy that you had to post it!  You made the thread so much about you, that you couldn't just say nothing - you had to tell others you had nothing to say!

I've given it zero thought and don't really intend to.

Isn't buy and hold investing a common approach here? That's basically what I'm saying. I buy, I hold, I don't think much more about it.

It was asked what our predictions are and what changes we plan to make so I answered the question, and I don't anticipate seeing anything significantly different to do next year, not in my particular circumstances.

How is that a mistake??

It is not a mistake. People responding to you are active investors, jumping in and out of markets and dabbling in speculative investments like crypto hoping to get higher return than the market. They have different perspective than buy and hold folks.

harvestbook

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I'm comfortable to believe that even if I got my forecasts correct, I'd either do the wrong thing or the real world would not turn out to do "what it was supposed to do," and that all the other vagaries and uncertainties would wash out whatever brilliant plan I might have concocted.

I'm ok doing what I've always done, just holding a little more cash and adding iBonds as I ease into retirement this year. The things I can largely control (leisure spending, plans for surprises, etc.), I can handle as needed. I stay ambivalent on what the markets do.

Financial.Velociraptor

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When I look at this St Louis Fed graph, I don't see any activity in overnight repo.  Do you have a different set of data showing the usage and impact are dramatic?
https://fred.stlouisfed.org/series/RPONTSYD

Thanks for setting me straight.  I was misinformed.  The repo arrangement is very powerful as it essentially extinguishes credit in an overnight and rather final way (or final until the Fed stops bribing banks to stop issuing credit).  Of course, this is demand killing and can lead to recession on its own.  The Fed is trying to walk a razor's edge.  I think they have more leeway than most though.  They have tightened with gusto and consumer demand has stayed strong.  So to me, a bet on a  steep recession is a bet against the american consumer.  And I see the consumer as being a little crazy after a couple years of covid restraint.

I think it was Yogi Berra who said "Predictions are hard, especially about the future."  I'll be running a market neutral trading strategy, chasing momentum both up and down depending on where the market is moving.  I think that is an all-weather approach as charts speak the same language no matter what GDP is doing over a 12 month period.

JAYSLOL

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The Feds numerous mistakes will continue in 2023.  They may not call inflation transitory, nor predict it will be gone in 6 months (Dec 2021) or predict unemployment will not rise at all (summer 2022)... but they will make mistakes.

Speaking of mistakes, the thread title is "'23 Predictions... & how are you changing your investment plans", and yet look at all the replies with no predictions and no change of investment plans.

I don't understand your point.

Also, you don't know what our investment strategies are, so how can you say they're a mistake??
In a thread asking for predictions and investment changes, you had nothing to say.  And yet you felt your doing nothing was so newsworthy that you had to post it!  You made the thread so much about you, that you couldn't just say nothing - you had to tell others you had nothing to say!

I've given it zero thought and don't really intend to.

Isn't buy and hold investing a common approach here? That's basically what I'm saying. I buy, I hold, I don't think much more about it.

It was asked what our predictions are and what changes we plan to make so I answered the question, and I don't anticipate seeing anything significantly different to do next year, not in my particular circumstances.

How is that a mistake??
OP here...

I'm actually glad that Malcat and others have added their two cents on this despite not making investment plan changes based on their '23 predictions.  If they didn't post here, we'd just get a skewed subset of members posting to this about changes, rather than a healthy subset of 'stay the course'-rs reminding us all of the value of keeping a steady hand at the wheel even when seas are rough.

I'd argue that when you see an iceberg in your direct path, keeping on the same path isn't adviseable.  I see an 'iceberg' of longer lasting high interest rates, going up to higher levels, than is generally predicted.  That's why I am going to stay out of real estate and long duration debt, and throw a little extra into a sector that I think will outperform in those circumstances (financials). 

But others either don't see that iceberg, or see other, bigger, icebergs in all the other directions, and think that changing course has just as many if not more risks. 

I'm staying in the market, and not changing my equities/fixed allocation, so this is perhaps more along the lines of a mild steering manoeuver rather than a 180 degree turn.

Of course, seeing an iceberg is different than thinking you see an iceberg... and there are lots of fake icebergs on the ocean of investments.

Thank you for weighing in, and despite my personal choice to not change my investing behaviour or speculate on the coming year and what I could be doing about it, I am keenly reading and considering others predictions and appreciate your viewpoint.  That said, there’s actually an excellent argument to be made that the Titanic would have stayed afloat if it hit the iceberg directly rather than trying to steer away.

https://m.youtube.com/watch?v=VUNI8GnToDg

Now I know that may be taking the metaphor a little too literally, but I stumbled on that video randomly a few weeks ago and found it pretty interesting, and now giving it some thought as an investing strategy I have to decide if I want to hit an iceberg head on so to speak or attempt to steer away. 

wenchsenior

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Not changing anything. Still using the same plan and allocation I've been in for 20+ years.

It's worked great, why change based on temporary market conditions?

Fru-Gal

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Quote
[…] we will avoid recession altogether (most likely)

I agree with what someone around the forum had mentioned which is that honestly the Covid response was so much better than it could have been. It’s absurd looking at these companies, whether they are tech or retail, that blew up in 2020-22 to giant balloons and then failed to plan for demand going back down to normal levels.

So to me those aren’t recessionary situations, that’s just reality telling retailers that not everyone is going to buy a patio set every year and re-decorate their home office, and telling technology companies that not everyone is going to continue to require outsized/overhyped tech services and that many of the more useless employees they kept on from 2020 to 2022 are no longer needed. I’m still bullish on tech but there was and is a lot of bloat and bloviation.

That said I’m not in accumulation phase anymore, am FIRE.

Fru-Gal

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As for changing investment plans, I do think this can and should happen on a macro, multi-year level. For example, moving away from bonds, or deciding it’s time to cut VTIAX loose, or buying T-bills, or looking at real estate, or starting a business, or reevaluating risk tolerance, or adding/reducing cash. No one should blindly imitate, but intelligent perspectives on the macro trends can confirm your choices or make you subtly change course.

VanillaGorilla

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I have no idea what the market is going to do. I will continue to live in my nearly-paid-off house, hold 100% equities, drive older, efficient cars bought in cash, shovel money into the market with every paycheck, and prioritize simplicity in my investing approach.

If I had to guess I think the fed will hike rates a bit more, inflation will ease as the world moves past the pandemic disruptions, the bubbly assets will continue to pop (speculative stocks, cryptocurrencies, investment real estate). I expect house prices to come down a bit but not tremendously. I do expect the market to stagnate as people will be more motivated to hold on to low rate mortgages. I doubt the SP500 will post two negative years in a row, but nobody knows.

RWTL

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I have no idea what the market is going to do. I will continue to live in my nearly-paid-off house, hold 100% equities, drive older, efficient cars bought in cash, shovel money into the market with every paycheck, and prioritize simplicity in my investing approach.



I know there are plenty of threads on paying off vs not paying off a house.  Although some people may not feel it is the best use of money, I love having a paid off house. 

VanillaGorilla

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I have no idea what the market is going to do. I will continue to live in my nearly-paid-off house, hold 100% equities, drive older, efficient cars bought in cash, shovel money into the market with every paycheck, and prioritize simplicity in my investing approach.



I know there are plenty of threads on paying off vs not paying off a house.  Although some people may not feel it is the best use of money, I love having a paid off house.
The math is pretty clear - a paid off house makes a RE plan more robust to the worst possible scenario - it reduces sequences of returns risk. A mortgage makes a RE plan more lucrative under above-average conditions.

I regret paying this mortgage off, but not much. A lot of life circumstances changed from when I bought it; paying it down made more sense when I was single. Now that I'm not, our combined economic resilience is much greater, and the risk incurred by a mortgage is less. To each their own.

waltworks

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If you have a mortgage from the last 3 or 4 years, there are not a lot of scenarios where iBonds will pay less than your mortgage, so there's really no reason to pay it down rather than just stack up iBonds.

-W

ixtap

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I have been predicting the next recession since 2018. Luckily, I already knew then that I was bad at this, since I saw the Great Recession coming as early as 2006.

So I just keep on doing the same things, adjusting for facts such as changing income or laws, rather than nebulous predictions.

clarkfan1979

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I'm a little short on cash at the moment to purchase another rental, but I'm considering buying a vacation rental near Breckenridge, CO. It would party due to personal reasons (I like to snowboard) and part investment. In a perfect world, I'm looking for a good house in a great location with a bad operator. I'm looking for a turn key vacation rental that is not currently doing well because the owner does not like being an operator of a vacation rental or is just bad at it or maybe a little bit of both. In a perfect world, I could "assume the mortgage" if they have a rate less than 4%.

Just be aware the short term rental license no longer transfers with the property - you'll have to re-apply for one, and the wait time (there's now a hard cap) is VERY long as the current number of extant licenses exceeds the cap by quite a bit and there are a few hundred properties on the list.

There will be great deals in Breck at some point soon, you just won't be able to nightly rental them. I think we're going to leave after this year as the community has thinned out to the point where it's not really a town anymore. But for vacations, it's still super fun.

-W

@waltworks At this current moment, Breckenridge is not affordable for me. I'm looking at Alma & Fairplay within 30 minutes of Breck. Similiar to Summit County, the STR licenses do not transfer in Park County. There is also a 3-6 month waiting period. However, they are not difficult to get and there is no cap. Park County wants the hotel tax with STR's to fund the county that has traditionally been poor and under funded. 

waltworks

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I would sit tight. Breck is in the process of maybe crashing.

I would personally not touch Park county with a 10 foot pole, especially if I wanted to go ski/ride Breck. Hoosier... sucks. 30 minutes on a good day, sure. There are not that many good days (for road conditions) in the winter around here, though.

-W

MustacheAndaHalf

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When I look at this St Louis Fed graph, I don't see any activity in overnight repo.  Do you have a different set of data showing the usage and impact are dramatic?
https://fred.stlouisfed.org/series/RPONTSYD
Thanks for setting me straight.  I was misinformed.  The repo arrangement is very powerful as it essentially extinguishes credit in an overnight and rather final way (or final until the Fed stops bribing banks to stop issuing credit).  Of course, this is demand killing and can lead to recession on its own.  The Fed is trying to walk a razor's edge.  I think they have more leeway than most though.  They have tightened with gusto and consumer demand has stayed strong.  So to me, a bet on a  steep recession is a bet against the american consumer.  And I see the consumer as being a little crazy after a couple years of covid restraint.
Glad to help.  I think you hold the market majority view of either mild or no recession, also called a soft landing.  If you have historical data that challenges my view of an average or worse recession, I'd like to have that view challenged.

I think a strong consumer adds to inflation - that is a headwind for rapidly falling inflation.  The more consumers spend, the more inflation we'll get.  I suspect consumers exaggerate gas price changes, and with falling gas prices they may start spending normally again (which fuels inflation).


I think it was Yogi Berra who said "Predictions are hard, especially about the future."  I'll be running a market neutral trading strategy, chasing momentum both up and down depending on where the market is moving.  I think that is an all-weather approach as charts speak the same language no matter what GDP is doing over a 12 month period.
I had a market neutral position based off your ideas.  I used a 3:2 ratio of long VIXY to short UVXY (which has 1.5x leverage).  Unfortunately I saw UVXY fall slower than 1.5x and rise faster than 1.5x, which suggests other factors than volatility decay.  It was too much work for too little gain either way, and I stopped.

Earlier this year momentum ($MTUM) was losing against the S&P 500 ($SPY).  But over the past 3 months, I see MTUM +3.2% versus SPY -2.5%, leaving them both tied at -18% YTD.  Even without active management, momentum looks interesting.

I'm focused on a heavy cash position with high leverage put options.  I risk 1/3rd of my portfolio while gaining 2x the market drop, which I think is a good risk-reward tradeoff.  I'm slowly adding to positions.  As long as recession risk is uncertain, I think this market has a ceiling that lowers the risk of investing bearishly.