DJ - keep in mind the money being pumped into the system is not stimulus money its protection money that is attempting to preserve the economy as much as possible almost in a form stasis - there is no growth caused by these funds. There will likely be more rounds of this protective money and then rounds of stimulus money and continued low rates.
I think the economy will spring back quite a bit but it will be some time and then we will have a much bigger overhang of debt that will drag growth. And who the heck knows how to unwind all of this. But the rest of the world is in it too so on a relative basis globally it should be close to neutral - ie it's not like the US is faltering while everyone else is growing.
Understood. I was just using the terminology used by the government and media. Everything to date was really an emergency relief package or try-to-stop-a-panic package, and that stimulus rounds will come later. Also, I wasn’t saying the 4% rule wouldn’t work as one response addressed.
I just think it’s going to take more time to work though the situation than others seem to be considering. 1Q GDP numbers are going to be bad and 2Q numbers worse, so we are in a recession. As we emerge from the medical crisis, 3Q or 4Q will certainly have better numbers that 2Q. If 2Q GDP is down 30%, then a 10% increase from that in 3Q won’t be spectacular performance even if by official definition it means that the recession is over.
At the beginning of 2020 the market was fairly expensive by historical measures (e.g. PE10), somewhat priced for perfection. At the present the market is down only 15% from the peak, which isn’t much.
In my very limited survey, people tell me their (non-medical) companies are focused on reducing costs and delaying supplier payments. Their salespeople are fielding customer requests for pricing reductions and payment considerations more than new sales. Layoffs and furloughs are at astounding levels. Already there are unprecedented numbers franchise-own hotels entering bankruptcy. I imagine will see significant bankruptcies with restaurants and other heavily impacted businesses.
I don’t see it taking only 12-18 months to have a full recovery, if recovery means everything is back to 2019 GDP levels. As we recover, companies won’t be as quick to rehire, bring back contractors & consultants, invest or return business travel to previous levels as they were to stop everything in March and April. It should take more than 24 months to get back to where economic measures were at the end of 2019.
To me, that makes it seem like the stock market is still relatively expensive and things should go down or move sideways for a while. No, I haven’t sold to wait things out. I still make regular scheduled investments and haven’t changed asset allocations. But I’m also not scraping together every free dollar to buy extra because I’m convinced stocks are cheap and will bounce back quickly.
I basically agree with you. I do spring back, as in open, but everything else will take longer. I think we will "technically" get out of the recession fairly quickly (i.e two quarters of declining growth), heck by that definition the 3rd quarter may be the one that gets us out - all you have to do is go from nothing now to something then, right?
But everything else will take longer and I have said elsewhere we never turned off the stimulus or QE/Fed support from the financial crisis.
As for the markets, I clearly don't understand and don't time, just stick to my AA which is conservative. But markets were definitely stretched going into this year for sure. I felt before the QE/Rate cuts in 2019 that SP500 at 2900 was the high point of being fairly valued bc earnings didn't grow so I am really struggling to understand how it being at 2750-2850 now is appropriate, I mean I like it higher than lower, but I just don't get it. Below is what I think of SP500 - $2600 or less is where I think it should be right now and honestly $2300 didn't and still doesn't seem crazy to me. Not much I will do with it but I use it as a guide post.
SP500 earnings with 20PE IMO appropriate
2016...……………………………………………………………...$101...………………..$2020
2017...……………………………………………………………...$115...………………..$2300
2018 (tax cut, no growth otherwise)...……………$136...………………..$2720
2019 (no growth)...………………………………………….$140...………………..$2800
2020 (original est)…………………………………………...$162...………………..$3240
2020 (revised) ????………..doesn't matter, pe will be really high
2021???? (20% drop from 2020 est)………………$129...…………………$2592
Topic: Race from $2M to $4M...and Beyond! (Read 1448954 times)
