When will the market crash: 2017 edition

[U-Ute]

The market continues to climb and climb. Mainly because everyone keeps buying index stocks, floating all boats equally.

Because not all companies are sectors are created equal.

www.mauldineconomics.com/connecting-the-dots/one-sector-is-propping-up-the-us-stock-market (http://www.mauldineconomics.com/connecting-the-dots/one-sector-is-propping-up-the-us-stock-market)



US stock benchmarks hit new all-time highs this month, and despite rich valuations, buyers think they’ll go higher still.

One reason for this exuberance is the growing dominance of passively indexed ETFs.

Rather than go to the trouble of picking individual stocks, people dump their cash into index ETFs. The ETF sponsor then buys every stock in the index—even the ugly ones.

Profit growth seems to justify this, even in the broad indexes. In its June 16 bulletin (https://insight.factset.com/hubfs/Resources/Research%20Desk/Earnings%20Insight/EarningsInsight_061617.pdf), FactSet Research estimated that combined profits in the S&P 500 companies will rise 6.5% in this year’s second quarter.

So, “combined profits” means some companies (and sectors) performed better than average, some worse, right?

Actually, no.

What we really have is one sector growing profits at a gangbuster rate. The others, not so much.

[Sullyute]

I fall in that trounche of investors. :shame:


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[mUUser]

https://www.usatoday.com/story/money/2017/10/17/dow-tops-23-000-first-time-stock-market-rally-gains-speed/769950001/


Still growing at record pace. World economy, earnings, low interest rates and tax cuts fueling the run. No obvious indications of a near-term slowdown.

[concerned]

https://www.usatoday.com/story/money/2017/10/17/dow-tops-23-000-first-time-stock-market-rally-gains-speed/769950001/


Still growing at record pace. World economy, earnings, low interest rates and tax cuts fueling the run. No obvious indications of a near-term slowdown.

Mnuchin is right about one thing--if they dont pass tax cuts, the market will tank.

[U-Ute]

Mnuchin is right about one thing--if they dont pass tax cuts, the market will tank.

Why? Because the market has priced in tax cuts already?

[concerned]

Why? Because the market has priced in tax cuts already?

Yes. because they have been anticipating them since November.

[Two Utes]

Yes. because they have been anticipating them since November.

And shouldn't the market have also anticipated that they might not pass given what has happened over the last six motnhs with other legislation?

[U-Ute]

Yes. because they have been anticipating them since November.

But this run has been going on since 2008.

2277

[concerned]

But this run has been going on since 2008.

2277

Right, but the bump following the election is particularly due to corporate America's anticipation that (i) there would be tax cuts, and (ii) a roll back of regulations in a Trump administration.

[concerned]

And shouldn't the market have also anticipated that they might not pass given what has happened over the last six motnhs with other legislation?

Not yet apparently.

[mUUser]

But this run has been going on since 2008.

2277

Yes, its been a tremendous time to be in the market. Last time we saw something like this (2015 notwithstanding) was the 9 year growth from 1991-1999, which was followed by a fairly nasty 3 year correction. I think we're all a bit nervous, and that tax cut (at least at the corporate level) would certainly help keep this thing going.

[U-Ute]

Yes, its been a tremendous time to be in the market. Last time we saw something like this (2015 notwithstanding) was the 9 year growth from 1991-1999, which was followed by a fairly nasty 3 year correction. I think we're all a bit nervous, and that tax cut (at least at the corporate level) would certainly help keep this thing going.

I doubt it.

The weaknesses in the market right now are supply side. People with mortgages and kids don't have any money left over to buy things. From what I understand, this run has less to do with underlying financials and more to do with stock buybacks. The cynic in me thinks that board members are using buybacks as a way to meet share price goals in order to get bonuses.

[concerned]

I am not suggesting that if the market "tanks" it will go back to early 2009 levels. It is up 25% since the election, which is an astounding percentage. So even if it tanks 25% (which would be huge) it would be where it was a year ago.

[NorthwestUteFan]

All that stock market growth never trickles down. The median income is still in the mid-$30k range, and nearly 70% of the population cannot weather a $1000 shock (sudden medical bill, car repair, etc).

The economy does not have a supply problem, it has a demand problem. Companies hiring a bunch of new people to build more widgets doesn't do anything to increase the demand for widgets, all that would do is decrease the demand and drop prices for said widgets.

This tax cut is going to be a real-world increase for single taxpayers making more than about $19k, and families making over roughly $35k. And it will be at least partly funded by cutting services to low-income people, further squeezing the people at the bottom which always further decreases the demand pull. It will punch at least an additional $2T hole in the budget (and thus the overall economy).

As the tax cut framework currently stands, nobody (or very few) posters in this board will actually see tax reductions, and almost all of us will be affected by the loss of itemized deductions.

Pushing through this tax cut is incredibly irresponsible. But it follows the standard ploy of privatizing the profits, while socializing the risks. Lather, rinse, repeat.

[Dwight Schr-Ute]

All that stock market growth never trickles down. The median income is still in the mid-$30k range, and nearly 70% of the population cannot weather a $1000 shock (sudden medical bill, car repair, etc).

The economy does not have a supply problem, it has a demand problem. Companies hiring a bunch of new people to build more widgets doesn't do anything to increase the demand for widgets, all that would do is decrease the demand and drop prices for said widgets.

This tax cut is going to be a real-world increase for single taxpayers making more than about $19k, and families making over roughly $35k. And it will be at least partly funded by cutting services to low-income people, further squeezing the people at the bottom which always further decreases the demand pull. It will punch at least an additional $2T hole in the budget (and thus the overall economy).

As the tax cut framework currently stands, nobody (or very few) posters in this board will actually see tax reductions, and almost all of us will be affected by the loss of itemized deductions.

Pushing through this tax cut is incredibly irresponsible. But it follows the standard ploy of privatizing the profits, while socializing the risks. Lather, rinse, repeat.

When President Trump did his big reveal of the tax plan details, I found it really interesting when he got to the "Death Tax" portion and the whole room irrupted in applause. As if any of them would ever be effected by any changes to the death tax. Oh to be so hindered by inheriting $5 million.

[Two Utes]

When President Trump did his big reveal of the tax plan details, I found it really interesting when he got to the "Death Tax" portion and the whole room irrupted in applause. As if any of them would ever be effected by any changes to the death tax. Oh to be so hindered by inheriting $5 million.

This is one of my biggest pet peeves. I'm a small government guy, but if we have to have taxes, the death tax seems to be the fairest one of all. it would encourage really rich people to spend their money, thus stimulating the economy. The people who inherit didn't earn the money. It's not their money and it never has been their money. And the person who actually earned it doesn't need it anymore. If we are going to tax, it seems this is where we should tax.

But a stupid majority of Americans don't see it this way.

[concerned]

This is one of my biggest pet peeves. I'm a small government guy, but if we have to have taxes, the death tax seems to be the fairest one of all. it would encourage really rich people to spend their money, thus stimulating the economy. The people who inherit didn't earn the money. It's not their money and it never has been their money. And the person who actually earned it doesn't need it anymore. If we are going to tax, it seems this is where we should tax.

But a stupid majority of Americans don't see it this way.

it doesnt encourage the rich to spend their money; it only encourages them to get their money out of their estates--into trusts, family corporations, savings accounts for children, etc. The number of estates that actually pay the the
tax each year is exceedingly small--I read somewhere last year that it was about 80 estates nationwide. Somebody said, if you pay the tax you are an idiot or getting bad financial advice.

[Two Utes]

it doesnt encourage the rich to spend their money; it only encourages them to get their money out of their estates--into trusts, family corporations, savings accounts for children, etc. The number of estates that actually pay the the
tax each year is exceedingly small--I read somewhere last year that it was about 80 estates nationwide. Somebody said, if you pay the tax you are an idiot or getting bad financial advice.

But distributions from trusts are generally taxable

[U-Ute]

All that stock market growth never trickles down. The median income is still in the mid-$30k range, and nearly 70% of the population cannot weather a $1000 shock (sudden medical bill, car repair, etc).

The economy does not have a supply problem, it has a demand problem. Companies hiring a bunch of new people to build more widgets doesn't do anything to increase the demand for widgets, all that would do is decrease the demand and drop prices for said widgets.

This tax cut is going to be a real-world increase for single taxpayers making more than about $19k, and families making over roughly $35k. And it will be at least partly funded by cutting services to low-income people, further squeezing the people at the bottom which always further decreases the demand pull. It will punch at least an additional $2T hole in the budget (and thus the overall economy).

As the tax cut framework currently stands, nobody (or very few) posters in this board will actually see tax reductions, and almost all of us will be affected by the loss of itemized deductions.

Pushing through this tax cut is incredibly irresponsible. But it follows the standard ploy of privatizing the profits, while socializing the risks. Lather, rinse, repeat.

Sorry. You are right. I meant a demand problem. People can't afford to buy stuff.

[U-Ute]

When President Trump did his big reveal of the tax plan details, I found it really interesting when he got to the "Death Tax" portion and the whole room irrupted in applause. As if any of them would ever be effected by any changes to the death tax. Oh to be so hindered by inheriting $5 million.

Bd_vAawM9LA

[mUUser]

I sold some index funds today to help fund a project. Most of my market investments like savings, 401k etc....are in stock or bond indexes, particularly market indexes. I'm shocked how much the market increased in the past year. Whether you like Trump or not, this economy seem to be on an upward trajectory fire right now.......and with that, it's hard to complain.

[concerned]

I sold some index funds today to help fund a project. Most of my market investments like savings, 401k etc....are in stock or bond indexes, particularly market indexes. I'm shocked how much the market increased in the past year. Whether you like Trump or not, this economy seem to be on an upward trajectory fire right now.......and with that, it's hard to complain.

last summer, I took some money out and put it in cash for my kids' college tuition b/c I was afraid of a correction. I have been kicking myself for taking it out too early.

[U-Ute]

I feel like I'm playing a game of chicken where I can't see the other car.

[mUUser]

I feel like I'm playing a game of chicken where I can't see the other car.


If you feel sick to your stomach because the world geopolitical landscape is too dicey (or a hundred other reasons) then get into something safe. If your gut tells you this is gonna keep rolling along then stay in. IOW, there’s just no way to predict market corrections. Better to sleep well at night than worry about it. That’s my opinion anyway. I like what I see and am betting on higher consumer & business confidence, low unemployment, job growth, an even bigger kick in the pants with the recent tax cuts, and other solid indicators. Admittedly, in the end it’s always a short term risk.

[mUUser]

Could this be the correction we've been waiting on????.......10 year yields zoomed past 2.75% & interest rates hiked. Inflationary concerns follow. Did the economy heat up too much too fast and the market is saying Whoa, Nellie!!!

[concerned]

In the category of "there is always a tweet," this might take the cake


https://pbs.twimg.com/media/DVTWt-TXkAIFiS1.jpg

[Rocker Ute]

In the category of "there is always a tweet," this might take the cake


https://pbs.twimg.com/media/DVTWt-TXkAIFiS1.jpg

Fortunately for Trump, it was just the Dow Jones that dropped over 1000 points. Heaven help us if the Deep State Dow Joans ever does that.

[Dwight Schr-Ute]

In the category of "there is always a tweet," this might take the cake


https://pbs.twimg.com/media/DVTWt-TXkAIFiS1.jpg

Fake news! Not that it matters.

http://www.businessinsider.com/fake-trump-tweet-about-stock-market-dow-jones-2018-2


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[concerned]

Fake news! Not that it matters.

http://www.businessinsider.com/fake-trump-tweet-about-stock-market-dow-jones-2018-2


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I am such a SUCKER

[Rocker Ute]

Like the other similar hoaxes it still underscores the problem that it is completely plausible if not absurdly believable.


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[NorthwestUteFan]

A perfect Poe.

I'm not convinced he ever graduated from high school, let alone Wharton.

[U-Ute]

Like the other similar hoaxes it still underscores the problem that it is completely plausible if not absurdly believable.


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The most believable lies start with a kernel of truth.

In this case, nobody would be surprised if he actually tweeted that.

The funny thing is the author of the hoax was surprised that people actually believed him. He posted it completely as a joke.

960632508865024000

[chrisrenrut]

From an economic standpoint, it's interesting to think about how long this downturn due to the Coronavirus is going to last.

The foundation of the bull market started to crack when manufacturers in China started shutting down. This will be reflected in some companies Q1 financial results coming out in the next month or two.

The travel industry is now being hit hard. Flights, cruises, hotels, and destination resorts are feeling the sting already, and it will only get worse over the next few weeks. Results for this will span over Q1 and Q2 financial results.

Small business are going to be hurt as activities such as the trade shows and conferences, NCAA tournament games, and other events get cancelled or limit crowds. Think of the restaurants, parking, shops, etc. that depend on these crowds. The Qualtrics conference was supposed to be downtown SLC this week, and 4 weeks before, I couldn't find a single hotel room downtown. Once it cancelled, occupancy opened up, and I imagine it's pretty easy to get a table at almost any downtown restaurant this week.

Many of these companies may have to start laying off employees as cost-cutting measures. How will the market react to employment numbers moving the other direction for the first quarter in a few years?

Ii think we can hope for a recovery in Q3 as life gets back to normal. This is a unique market force that hopefully has a distinct end, as long as we can weather the short term effects. But there may be some longer lasting effects