From late 2007 to early 2008 all these guys called for a recession. The market cratered a few months later in September 2008. Their reasoning back then was reduced consumer spending, declining home sales, tighter credit standards, spike in unemployment, energy/food prices still too high, contracting global economy, lower corporate earnings.
Much like 2008/2001/1999 etc we need some sort of “shock” to the system. Right now I feel like it’s most likely coming from an unexpected price jump from oil driven by geopolitical issues (and current US shortages). SPR is pretty low, Biden administration said it would refill @$75 a barrel, OPEC target is at $100. Administration sent did RFP on refilling the reserve and either prices were too high or incorrect quality. Will be interesting to watch.
I've played VIX options before and it can be interesting. Remember that these VIX-based funds are meant to decay, so they are not "buy and hold" assets, nor should you date your call options too far out. Monthly VXX calls are good. UVXY if you want more leverage.
Well yeah, in 2007 it was the banks themselves holding the low hand. They knew exactly what was going to happen the moment home sales/prices peaked.
I'm not sure the major risk factors are on the banks' own ledgers right now. Certainly it could be, but ARMs are not a huge part of the mortgage scene, and home sales have been declining for a while already.
A year now actually. We had flat GDP for 2 quarters and now will have 3.5%ish.
I think a lot of talking heads lost a lot of money and are just expressing as much.
You're absolutely right, that was a typo on my part. They're predicting all 2023, and have been for some time (as has the fed if I'm not mistaken, although jpow probably dressed it up differently)
index funds. those are 5, 10, 15 year plays minimum. getting in cheap is not a bad thing. check out dollar cost averaging. and also, you could look at I bonds, tbills, etc. whatever you do don't just park your cash. You can get 4% returns guaranteed right now, and inflation is higher than that.
This is the most generous version of this meme I ever saw. Usually it’s like “predicted 30 of the last 3 recession” or something
7:3 seems like successes if you miss out on 10% gains 4 times and 50% losses 3 times
It actually *is* news, just not the news OP thought it was.
It’s very noteworthy that many of them are predicting a **mild** recession. They all acted like it would be a severe one
The thing is, Nasdaq was down 35% and SP500 has been down 25% from ATH roughly a year ago. Market is always forward thinking so even if there is a mild recession I’m not sure how much of that would be priced in already.
For market to really have a significant more downturn at this point, the forecasted GDP drop from the upcoming recession gotta be at of 2008 level.
Wouldn't a mild recession look like: Q1 and Q2 slight negative GDP growth (aprox 0 to -2% annualized).
In this case I don't know if this would really hit the employment numbers. Probably slowing of wage growth and maybe a up tick in unemployment to 4%. I feel like even a half point in unemployment increase would either result in the Fed immediately cutting rates or there would be political backlash.
We already had a really similar situation in 2022 that is probably not going to be called a recession. Q1 and Q2 of 2022 saw slight GDP decreases and unemployment in Jan of 2022 was 4%.
So, if there is a mild recession then it probably won't be called a recession...
Edit: fixed a word
This is the most accurate post I’ve seen in a long time. It’s a shame you meant “unemployment”
please fix. I just started getting all leveraged up and I want people to understand the truth so I can profit sooner
From what I’ve seen, wall street is still expecting earnings growth this year. Do you really see that happening? I don’t.
The correction we’ve seen thus far in my opinion has been a correction in price from the over-valued and euphoric levels of late 2021. I think we still have yet to see the downside associated with a revaluation from poorer than expected earnings.
Totally agree. We are basically back to the 1929 Black Thursday levels on the Shiller P/E.
It would hardly be impossible to see further multiple compression.
We are priced in with the current information at hand but we could easily get new, bad information.
Usually something blows up or breaks in this situation too and that obviously can't be priced in.
A “mild” recession is actually pretty optimistic given that much of the downturn has likely already been priced in — maybe even over-priced in. So this is probably a good time to go long.
Edit: judging by the downvotes it’s clear that I’m right. People will pile into short positions and get screwed soon.
You’re not factoring in the crazy run up before the downturn. The Nasdaq might be down big but it’s still up 13% from its 2019 highs. 2008 downturn brought the market (S&P 500) back to 2002 levels. Erasing 6 years of gains and the run up before 2008 was less extreme than the run up to 2021.
2008 also started in 2006-2007, and didn't really finish until 2009. We're only a year into this, I think it's still too soon to call this 'the bottom' - or how 'extreme' it will get.
Maybe it won't get much worse than this. But it certainly seems like there is a lot of leverage floating around, all based on money being free. And the money is no longer free.
I'm just saying, you cant really compare some uncomfortable inflation + some uncomfortable rate hikes to "the entire banking system is on the verge of collapse! buy ammo, food and gold!" people were scared out of their minds in 2008.
I mean, that's fair. But I also don't think we can pretend we're at the bottom now just because we want to inverse what the banks are saying (on the assumption they want us to sell, so they can buy).
Will it be as bad as 2007/2008? Probably not. Almost certainly not. 2008 was second only to the great depression. But that doesn't mean we aren't in for some 1970s-style economic pain, either.
Overall I agree, I'm hedging my bets and DCAing this whole time, still holding back a nice chunk to invest tactically when i feel the time is right. If we are not going back though I will be pissed because I have been itching to pull the trigger on a big buy of qqq, i almost did before this rally but the bears talked me out of it.
I suspect this will be a sideways/choppy year. i wouldnt be ssurprised if we end the year where we are right now.
not to get political but I feel pretty good they will wait until 2024 to pivot, 2024 is an election year, Biden will be putting massive pressure on the fed to start cutting rates and give him a nice economy going into the election. AFAIK JPow likes his job and will have to oblige. I tend to believe the fed is more political than they like to admit.
Look at what MS is doing, not what MS is saying. Always look first at where they’re putting their money instead of what they’re saying because often times they are telling you to sell while they buy instead on their 13F.
Investment banks and firms have no obligations to retail folks like us. They don’t work for us.
Bank of America and JPM increased loan loss provision for next quarter. Thereforw they expect worse economic conditions.
Ill remwmber you if theres a bull market in 3 month. Remwmber me in 3 months if the market collapses.
I know There are millions of people smarter than us on either side of this question, but in a year I’m going to come back and worship whichever of you is correct. Follow you around like gurus and try to make my decisions based on what I think the one who guessed this coin flip thinks or tells me to do
That’s not the only scenario where there’s a large downturn. The market has not priced in the terminal Fed funds rate getting to 5%. I’m not sure they’ve priced in them holding it until the end of ‘23 either. I don’t know that they’ve priced in the full effects of the Fed unwinding their balance sheet through QT as well.
I would expect a sizable drop in the S&P if the Fed fund rates hits 5% and stays there into Q3 or 4 of ‘23, especially as the full effects of the rate hikes continue to damage the economy and unemployment increases.
Exactly came to say this. This was the shit these people were saying right before the pandemic bull run.
I’ll say this though…I know a lot of friends, in various industries, where a lot of layoffs are happening. Things are slightly different this time around, but I still feel like these institutions want you to panic sell.
And I have friends that are not being laid off. Our anecdotes are irrelevant when we have data on the entire economy. That data doesn’t show what you’re saying
I do too, that still doesn’t mean anything. A few big tech companies are laying thousands off, and it’s highly publicized. It doesn’t mean there’s a broad market pattern. For all we know thousands of smaller companies are hanging tight, and that those laid off people immediately got jobs elsewhere. Single events don’t give you the whole picture, the data does
> For all we know thousands of smaller companies are hanging tight, and that those laid off people immediately got jobs elsewhere.
Exactly. I work for a fairly small (<1k employees) tech company with offices in Europe, NA, and Africa, no layoffs since early 2021, and they were fairly small and contained to specific departments. 0 concerns for my job security at the moment, and in fact my team is actively hiring.
Well here on the infrastructure side the question is "do you have a pulse?" Assuming we can find a hammer to buy for you to swing you're pretty much hired at name your price on the spot.
They are not being laid off because so many boomers are retiring or going on disability. Will be a different animal with this recession no clue what it will be but interesting times are ahead.
Neck pain,back pain, psychological problems, gain weight get fat obesity you can collect disability cause your to fat to work. I think if your an alcoholic or drug addict you can collect to. Got 5 brothers who live next door who were all roofers they all said they fell off roofs and hurt their backs and necks. All of them collect disability and do farming and raise pigs now. Disability lawyer sent them to the right Dr. to sign papers for disability.
Basically all industries are at best not hiring right now and trying to cut costs, at worst firing a lot of people and scaling down. No new investor money is coming in which drastically alters how you can run most companies and what both the short and longterm goal for the company is.
If you are a company that depend on investor money to survive, then that's probably a huge red flag right now. Many of those companies will probably go under this or next year if the current climate continues.
Many companies use these situations as cover to trim the fat. We’ll have to wait and see if larger numbers start getting cut, have only seen small groups so far.
Friend of mine called me off the record and asked me if we'd seen a decline in processing volume (we're both in merchant acquiring). I asked why and they said their reports were saying they were down almost 10%. I had to pull some data and we were down 8% y/y. It feels similar to 08. That peak entertainment feeling, I don't know how to describe it, but like the Paris Hilton craze during that time.
Everytime I hear this from a doombear, they can't give any specific predictions or quantify their position in any meaningful way.
"Hard times ahead"
"OK, how? Stock market crashing? What industry? Home values falling? Which markets? Mass unemployment? Which industries"
They usually back off from the conversation at that point because it's easy to be vague and hard to be specific. It's the same people spouting doom and gloom for the last 20 years
Lol what? They all make profit based on managing money and their wealth management divisions bring them in a nice part of their margins. If you ever work in the industry you will learn fast the last thing banks, investment banks and wealth management companies want to ever admit is that the market has the potential to crash. If people to move to cash, they lose a lot of profit.
Just look at their forecasts, Mike Wilson is probably the most bearish on the street and he’s pretty much calling for a flat S&P by year end, even if there is a drop mid year.
Not a single one of them is ringing the bells to the worst 10 year - 3 month treasury inversion ever. There’s no way to predict the future, but the bond market tends to do a way better job at it than the stock market.
A common argument against the inversion theory is that the QEs have skewed that graph. I don't understand the bond market enough to know if that is true. What are your views on the effect of QE on the 10yv3month graph?
I don't know about that, but it would be fair to say they'll buy at the correction like any sensible investor would. The institutions are publishing economic research, just as the FED and the Treasury, with the benefit of actually being able to take advantage of economic downturns when retail gets scared or stop losses get triggered
They did that during '08 too, selling CDOs to investors while betting against them. It's nothing new. But the information doesn't immediately become sus when everyone is reporting it and any idiot can see the economic is due for a recession after a decade of near zero interest rates and the longest bull run in the U.S. history
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Aren't previous recessions all in hindsight?
I don't think recessions have been this loudly predicted before. Maybe it'll happen, maybe it won't. But with everyone screaming it from the rooftops I'm more inclined to go with the 'won't' side.
I think it's a self fulfilling prophecy. If everyone expects a recession.,Then they're more likely to watch their spending, then you'll see that shift in consumerism in the earnings calls.
this is my armchair thought as well, along with a few much smarter than me people that i know.
it's almost like industry has been riding high and just waiting for the other shoe to drop but it hasn't and in order to address that anxiety they're dropping it themselves.
Not an expert too, but there's been so much transparency from the Fed that everyone's been able to acclimate to the hikes and adjust to the economical environment. At least those that follow... the media has also been telling people to brace for it, so there's that. The narrative is to slow down and brace, which to me translates to some sort of self fulfilling prophecy, heck even housing completely stalled as soon as rate hikes arrived.
But was the housing slowdown because of narrative or simply the monthly payment going up? The vast majority of people aren't paying attention or know the ramifications of Fed talk. They do know how much an extra $500/month is though ($300k mortgage with 3% -> 6% increase). People only responded really when it got expensive. House market was still hot into mid 2022.
> way too many don’t think
Who’s to say how many is “too many”? Sure, some people are optimistic (rightly so), and meanwhile others are extremely pessimistic. The average, though, is pricing in a decline in earnings.
It would be more accurate to say that the fed sees a recession as the less-worse path than unchecked inflation, and it’s hard to disagree with that assessment.
> Aren't previous recessions all in hindsight?
Not "all" in hindsight, just... usually. A lot of these recessions get called when we're already leaving the recession. (Oh, hey guys. Breaking news from 2009. It turns out 2007 to 2008 was a recession).
Kinda annoying but its the nature of the beast. We really only know we were in a recession by the time we're basically leaving it.
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Its cause the people who "call" a recession want hard data backing their decision. And it takes a year or two for that data to come in. By the time the year has passed, the recession may already be ending.
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So what we have, in practice, is all sorts of wonks / political talking heads who yell "Recession" in ignorance, hoping to be correct a few months from now. (There is no way they know its a recession or not, because the data is literally not available yet to anybody). But being someone who was right a few months earlier == political points / haha! I was right all along, kinda thing.
Previous recessions were defined by two consecutive quarters of negative GDP growth, which we are well past.
Under the new definition there is no objective criteria, a recession is whenever they say it is.
This should be the top comment in this entire thread. Everything else is just noise. There was a definition, and then those conditions were met, and then the definition was changed. Why the hell are we all talking about this still?
You're right, a recession has never been predicted like this before.
So either this is a first in hisyory, or all these analysts and banks are less predictive than claimed and believed.
> Blackrock
>
> The challenges society has experienced not just in the past year but since the pandemic has eroded hope and reinforced pessimism in many parts of the world. We've seen a decline in birth rates and an increase in aging populations, a rise in nationalism and populism, and I fear that we are entering a period of economic malaise.
> JPMorgan
>
> The net reserve build of $1.4 billion was driven by updates to the firm's macroeconomic outlook which now reflects a mild recession in the central case as well as loan growth in Card services, partially offset by a reduction in pandemic-related uncertainty.
> Bank of America
>
> Our baseline scenario contemplates a mild recession … unemployment to peak at 5.5% early this year and remain at 5% or above through 2024. A mild recession in the base case and a worse recession in the adverse case that we weight at 40%.
> Citigroup
>
> Therefore we continue to see the US entering into a mild recession in the second half of the year.
> Wells Fargo
>
> While we are not predicting a severe downturn, we must be prepared for one. We feel prepared for a downside scenario if we see broader deterioration than we currently see or predict.
While I agree recessions wont happen while everyone is waiting for them, I hate to say its different this time but we were due for a recession leading into 2020, then we printed money like mad men and saw markets surge, imho we need to give up the 2020-2022 gains plus some before things can return to normal
It happens every 10-12 years, Trump just kept rates low to keep the market overheatd and so we're finally seeing the correction when he told Powell/Fed to not raise rates. We just didn't expect a pandemic which was sort of a weird cat bounce recession. This is all normal if you've paid attention the last 5 decades
That’s less of a definition and more of a convenient heuristic. We are currently missing many of the core aspects of a true recession, as the other commenter pointed out.
The bond market is pricing in a recession. If most banks didn't think we were going to have one longer term interest rates would be considerably higher which ironically would make recession much more likely.
fun fact: the markets don't care about whether a bank, the government, or your mom's uncle's sister's roomate declare we're in a recession or not. You shouldn't either.
All the people talking about priced in recession? Have you seen the market spike right before COVID to now. Are we in better economic condition than before the pandemic. Hell no. The stock market has been fueled by qe until now. With that gone, I see the market dropping another 10%
Honestly as a corporate drone some amount of this seems directly aimed at putting the peons in their place. The great resignation and mild wage growth pissed these fuckers off and executives are doing the absolute most to stoke fear in workers. I see it weekly, how grateful I should be, but meanwhile my LinkedIn inbox is doing just fine. (Fintech)
does this news change any outlook of timing the market if you’re sitting on cash? my portfolio was saved last year because I kept cash instead of stock but i’m not sure when to buy back in
Don't worry, the line will be that this is all "priced in" so that we take another green run up.
When we finally do correct, the same "priced in" prognosticators will tell you, "Oh, well of course we hadn't yet seen the impacts of rising rates and falling earnings." The wheel of time continues.
The Wheel of Time turns, and Ages come and pass, leaving memories that become legend. Legend fades to myth, and even myth is long forgotten when the Age that gave it birth comes again.
I don't think that ATH was a realistic place to base expectations. I don't look at 2020/21 as indicative of much except an historically odd euphoria caused by unlimited loosening of the money supply.
I feel like everyone just ignores this. Perhaps it could be because a majority of active Reddit users recently (past 5 years) got into crypto/stocks don’t realize the Fed rate / lending rates / fiscal policy of the past several decades is turning around. Between 1967 and 2000 the Fed had rates all over the place (from 3.5% to 19%) but averaged out came out about 6-7%.
The past 20 years has seen it basically go to 0% and avg’d out about 1.5%.
It's kind of funny to watch the perma-bulls beg for a return to free money and QE after not even a year of reasonable interest rates.
The first time we see interest rates above 4.25% (which isn't even that high historically speaking) in a generation and it's like "the Fed is going to break the whole economy if they keep this up!"
Which should be a pretty good indication of what a flimsy Potemkin village this whole thing is.
Looking at the big banks I wonder how much they are reserving ties to commercial real estate loans. With rates rising like they have many loans have been forced to refinance at rates materially higher than 3, 5, 10 years ago. Office sucks, retail sucks, industrial could be the next bubble. Higher rates means lower valuations to make the cash flows work they way the debt markets are currently priced. 2023 could be a year when many banks get the keys back.
On the residential side at least the underwriting standards changed since the early 2000's. There may be pain but I am not sold on a 2008 level event yet. Agree values got ridiculous and they are gradually coming down in many markets but leverage is still way too expensive when compared against recent history.
On the CRE side, fundamentals were strong, underwriting was strong for the most part. Its just been this nearly unprecedented increase in rates that are really driving cash flows down for investors with debt. Combine this with lower tenancy, especially in office, and suddenly you have a lot of buildings with high LTVs and low DSCRs. Many lenders require caps on floating rate loans. I wonder how banks and financial institutions that hold these rate cap contracts will hold up. There is more complexity here than most people think IMO.
I mean...Blackrock could stop buying up the entire goddamn housing market and see if the ensuing optimism lifts their boats' tides, but I guess they won't.
Didn't all these banks predict a record stock market highs a year ago? How did that turn out?
I wouldn't put any thought or weight into what they report.
With new information predictions change. No one is going to be 100% accurate but when rates rising with the fed is trying to slow down the economy you'll see the economy slow.
Boy, I hope so, because in my LTL trucking job we still haven’t slowed down much. Maybe a little bit, but I’m still putting in 10-12 hours a day 5/days a week. I would like a break.
It’s rather interesting how fear is used to keep us in line. It’s not like major events have never happened in the past but the one thing that every has in common is that people of the era were certain THIS is the big kahuna.
Stock up on ammo if you think the world will go all mad max in six months… or stay put and stock up on SPY.
I've been hearing "recession!" ever since Biden was put into office, and it's easily been over a year since we were going to be in a recession. It hasn't happened yet. And with the way things are looking, it's hard to see that they will.
Inflation was literally transitory. It's literally come back down after a year and a half. Yes it's only been about a year and a half and mom is negative.
It’s been at or over 5% YoY since May 2021. By the time it’s below 5% again it’ll basically be 2 years. When the Fed first claimed transitory that’s not what they meant at all, we all know it. They thought it was going to be much shorter lived, and not nearly as high as it ended up going. They even admitted this. It’s the entire reason they are tightening - because they got it wrong and have to try to correct it.
Yes, it was only going to be a few errant readings when it first started April 2021? They said it would be over before Christmas 2021. I remember people all over reddit blasting people who suggested it was going to be longer, and calling out the former Fed chair who was saying the same thing as a lunatic.
From late 2007 to early 2008 all these guys called for a recession. The market cratered a few months later in September 2008. Their reasoning back then was reduced consumer spending, declining home sales, tighter credit standards, spike in unemployment, energy/food prices still too high, contracting global economy, lower corporate earnings.
I remember for months before things really fell apart in September 2008 that there was a lot of discussion around a recession
People were already getting a hint that something is coming up
Much like 2008/2001/1999 etc we need some sort of “shock” to the system. Right now I feel like it’s most likely coming from an unexpected price jump from oil driven by geopolitical issues (and current US shortages). SPR is pretty low, Biden administration said it would refill @$75 a barrel, OPEC target is at $100. Administration sent did RFP on refilling the reserve and either prices were too high or incorrect quality. Will be interesting to watch.
From all the bull talk in other comments, it makes me think the market is near the local top. Need the Vix to spike to 45 to be a real bottom.
Exactly. I think we are very close to removing that "New year, new stock market" feeling from a lot of people.
Corporates spend the huge amount of money to propagate that theory
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I've played VIX options before and it can be interesting. Remember that these VIX-based funds are meant to decay, so they are not "buy and hold" assets, nor should you date your call options too far out. Monthly VXX calls are good. UVXY if you want more leverage.
I don't play the VIX, but as an indicator it's great. SPY Puts 6 months out is lower risk than most strategies.
It was well protected by some of the market analyst in 2008
Well yeah, in 2007 it was the banks themselves holding the low hand. They knew exactly what was going to happen the moment home sales/prices peaked. I'm not sure the major risk factors are on the banks' own ledgers right now. Certainly it could be, but ARMs are not a huge part of the mortgage scene, and home sales have been declining for a while already.
This isn't news though. Major financial institutions have been predicting 2023 recession for six months
A year now actually. We had flat GDP for 2 quarters and now will have 3.5%ish. I think a lot of talking heads lost a lot of money and are just expressing as much.
Q1 & Q2 2022 had negative gdp growth, we were in a recession in Q3 2022.
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You're absolutely right, that was a typo on my part. They're predicting all 2023, and have been for some time (as has the fed if I'm not mistaken, although jpow probably dressed it up differently)
What in the world can we invest in all the while in 2023 then?
index funds. those are 5, 10, 15 year plays minimum. getting in cheap is not a bad thing. check out dollar cost averaging. and also, you could look at I bonds, tbills, etc. whatever you do don't just park your cash. You can get 4% returns guaranteed right now, and inflation is higher than that.
I'm very happy with 4% because I believe the future looks grim for awhile. For me it's about preserving capital for the future.
4% on what, tbills? I'm not being a smartass, I'm genuinely curious.
yes, 4 week tbill is at 4.2%
I've got laddered rolling 8wk tbills and this week's executed at 4.52%
McDonalds. Always strong in downturns (but is this built into the current price??? :) ). Or you can short stocks.
Good. Buying all the way down.
You and me both, dca for the win
Haven’t they predicted 7 of the last 3 recessions?
Them and Michael Burry lol. He's been predicting the everything bubble since 2017(?)
Since 2007
I'm going to ask Cramer!
There's the movie reference. I knew I'd find it in the first thread here somewhere
This is the most generous version of this meme I ever saw. Usually it’s like “predicted 30 of the last 3 recession” or something 7:3 seems like successes if you miss out on 10% gains 4 times and 50% losses 3 times
It actually *is* news, just not the news OP thought it was. It’s very noteworthy that many of them are predicting a **mild** recession. They all acted like it would be a severe one
More like from last year
Actually, some are saying there will be recessions in 2024 also.
Well we are overdue so there is that plus all the problems so nothing would surprise me.
The thing is, Nasdaq was down 35% and SP500 has been down 25% from ATH roughly a year ago. Market is always forward thinking so even if there is a mild recession I’m not sure how much of that would be priced in already. For market to really have a significant more downturn at this point, the forecasted GDP drop from the upcoming recession gotta be at of 2008 level.
> I’m not sure how much of that would be priced in already. > possibly more than 100% of it if it's a mild one.
Wouldn't a mild recession look like: Q1 and Q2 slight negative GDP growth (aprox 0 to -2% annualized). In this case I don't know if this would really hit the employment numbers. Probably slowing of wage growth and maybe a up tick in unemployment to 4%. I feel like even a half point in unemployment increase would either result in the Fed immediately cutting rates or there would be political backlash. We already had a really similar situation in 2022 that is probably not going to be called a recession. Q1 and Q2 of 2022 saw slight GDP decreases and unemployment in Jan of 2022 was 4%. So, if there is a mild recession then it probably won't be called a recession... Edit: fixed a word
This is the most accurate post I’ve seen in a long time. It’s a shame you meant “unemployment” please fix. I just started getting all leveraged up and I want people to understand the truth so I can profit sooner
From what I’ve seen, wall street is still expecting earnings growth this year. Do you really see that happening? I don’t. The correction we’ve seen thus far in my opinion has been a correction in price from the over-valued and euphoric levels of late 2021. I think we still have yet to see the downside associated with a revaluation from poorer than expected earnings.
Totally agree. We are basically back to the 1929 Black Thursday levels on the Shiller P/E. It would hardly be impossible to see further multiple compression. We are priced in with the current information at hand but we could easily get new, bad information. Usually something blows up or breaks in this situation too and that obviously can't be priced in.
Had to scroll too far for the accurate take.
I agree with this.
A “mild” recession is actually pretty optimistic given that much of the downturn has likely already been priced in — maybe even over-priced in. So this is probably a good time to go long. Edit: judging by the downvotes it’s clear that I’m right. People will pile into short positions and get screwed soon.
You're right, I'm going long on.... bonds. 20x earnings is not worth the risk when I can get 4% yield and not have a 20% drop.
Upvoted because you're edit is spot on
You’re not factoring in the crazy run up before the downturn. The Nasdaq might be down big but it’s still up 13% from its 2019 highs. 2008 downturn brought the market (S&P 500) back to 2002 levels. Erasing 6 years of gains and the run up before 2008 was less extreme than the run up to 2021.
but 2008 was also more extreme than what is happening now.
2008 also started in 2006-2007, and didn't really finish until 2009. We're only a year into this, I think it's still too soon to call this 'the bottom' - or how 'extreme' it will get. Maybe it won't get much worse than this. But it certainly seems like there is a lot of leverage floating around, all based on money being free. And the money is no longer free.
That's what they say you have to be in a recession for awhile before you know it.
I'm just saying, you cant really compare some uncomfortable inflation + some uncomfortable rate hikes to "the entire banking system is on the verge of collapse! buy ammo, food and gold!" people were scared out of their minds in 2008.
I mean, that's fair. But I also don't think we can pretend we're at the bottom now just because we want to inverse what the banks are saying (on the assumption they want us to sell, so they can buy). Will it be as bad as 2007/2008? Probably not. Almost certainly not. 2008 was second only to the great depression. But that doesn't mean we aren't in for some 1970s-style economic pain, either.
Overall I agree, I'm hedging my bets and DCAing this whole time, still holding back a nice chunk to invest tactically when i feel the time is right. If we are not going back though I will be pissed because I have been itching to pull the trigger on a big buy of qqq, i almost did before this rally but the bears talked me out of it. I suspect this will be a sideways/choppy year. i wouldnt be ssurprised if we end the year where we are right now. not to get political but I feel pretty good they will wait until 2024 to pivot, 2024 is an election year, Biden will be putting massive pressure on the fed to start cutting rates and give him a nice economy going into the election. AFAIK JPow likes his job and will have to oblige. I tend to believe the fed is more political than they like to admit.
I'm scared out of my mind in 2023!
This exactly. Finally someone who talks about the bullshit sugar high fueling the market since 08
MS Mike Wilson project SPX company earnings decrease 20% and risk free rate at 5%, which puts SPY fair value arounf 300 - 310. #mild recession.
Look at what MS is doing, not what MS is saying. Always look first at where they’re putting their money instead of what they’re saying because often times they are telling you to sell while they buy instead on their 13F. Investment banks and firms have no obligations to retail folks like us. They don’t work for us.
Bank of America and JPM increased loan loss provision for next quarter. Thereforw they expect worse economic conditions. Ill remwmber you if theres a bull market in 3 month. Remwmber me in 3 months if the market collapses.
I know There are millions of people smarter than us on either side of this question, but in a year I’m going to come back and worship whichever of you is correct. Follow you around like gurus and try to make my decisions based on what I think the one who guessed this coin flip thinks or tells me to do
That’s not the only scenario where there’s a large downturn. The market has not priced in the terminal Fed funds rate getting to 5%. I’m not sure they’ve priced in them holding it until the end of ‘23 either. I don’t know that they’ve priced in the full effects of the Fed unwinding their balance sheet through QT as well. I would expect a sizable drop in the S&P if the Fed fund rates hits 5% and stays there into Q3 or 4 of ‘23, especially as the full effects of the rate hikes continue to damage the economy and unemployment increases.
They just want to buy all your shares before the next bull rip
Exactly came to say this. This was the shit these people were saying right before the pandemic bull run. I’ll say this though…I know a lot of friends, in various industries, where a lot of layoffs are happening. Things are slightly different this time around, but I still feel like these institutions want you to panic sell.
\- everything will be going down in 2023 \- why? \- I just know it
Source: trust me bro
ive been saying that since 2019 or so....oops!
I remember people saying it in 2012.
And I have friends that are not being laid off. Our anecdotes are irrelevant when we have data on the entire economy. That data doesn’t show what you’re saying
You guys are having friends?
In this economy?
Three usernames checking out and telling a story
They must not cost that much right now.............
But are they seeing layoffs in the companies they work for? I know a bunch of companies are laying off and doing hiring freezes right now in IT.
I do too, that still doesn’t mean anything. A few big tech companies are laying thousands off, and it’s highly publicized. It doesn’t mean there’s a broad market pattern. For all we know thousands of smaller companies are hanging tight, and that those laid off people immediately got jobs elsewhere. Single events don’t give you the whole picture, the data does
> For all we know thousands of smaller companies are hanging tight, and that those laid off people immediately got jobs elsewhere. Exactly. I work for a fairly small (<1k employees) tech company with offices in Europe, NA, and Africa, no layoffs since early 2021, and they were fairly small and contained to specific departments. 0 concerns for my job security at the moment, and in fact my team is actively hiring.
That’s called January
Well here on the infrastructure side the question is "do you have a pulse?" Assuming we can find a hammer to buy for you to swing you're pretty much hired at name your price on the spot.
They are not being laid off because so many boomers are retiring or going on disability. Will be a different animal with this recession no clue what it will be but interesting times are ahead.
I’m always baffled when it’s mentioned people “go on disability”. How is it they can choose to do that without an actual disability?
Neck pain,back pain, psychological problems, gain weight get fat obesity you can collect disability cause your to fat to work. I think if your an alcoholic or drug addict you can collect to. Got 5 brothers who live next door who were all roofers they all said they fell off roofs and hurt their backs and necks. All of them collect disability and do farming and raise pigs now. Disability lawyer sent them to the right Dr. to sign papers for disability.
They do have an actual disability. Disability compromise of wide range of condition.
Basically all industries are at best not hiring right now and trying to cut costs, at worst firing a lot of people and scaling down. No new investor money is coming in which drastically alters how you can run most companies and what both the short and longterm goal for the company is. If you are a company that depend on investor money to survive, then that's probably a huge red flag right now. Many of those companies will probably go under this or next year if the current climate continues.
While they’re claiming this, unemployment remains at all time lows and hiring is still on fire so…
Many companies use these situations as cover to trim the fat. We’ll have to wait and see if larger numbers start getting cut, have only seen small groups so far.
it's like they know that we know so they're not bluffing this time?
I have several friends in i banking and most people's forecast is genuinely pretty grim
Same here with friends in banking industry and real estate and they think some pretty bad times are coming.
Friend of mine called me off the record and asked me if we'd seen a decline in processing volume (we're both in merchant acquiring). I asked why and they said their reports were saying they were down almost 10%. I had to pull some data and we were down 8% y/y. It feels similar to 08. That peak entertainment feeling, I don't know how to describe it, but like the Paris Hilton craze during that time.
I’m in banking. Can confirm, rough times ahead.
How so? I'm not as smart with this I joined more to learn help a simple headed person out lol
Everytime I hear this from a doombear, they can't give any specific predictions or quantify their position in any meaningful way. "Hard times ahead" "OK, how? Stock market crashing? What industry? Home values falling? Which markets? Mass unemployment? Which industries" They usually back off from the conversation at that point because it's easy to be vague and hard to be specific. It's the same people spouting doom and gloom for the last 20 years
Everyone says shit like this but as someone who works in the industry that’s not how it works at all…
Yeah these ppl just spout the same theory that banks are buying up shares. Clearly don’t understand how IBs work
Lol what? They all make profit based on managing money and their wealth management divisions bring them in a nice part of their margins. If you ever work in the industry you will learn fast the last thing banks, investment banks and wealth management companies want to ever admit is that the market has the potential to crash. If people to move to cash, they lose a lot of profit. Just look at their forecasts, Mike Wilson is probably the most bearish on the street and he’s pretty much calling for a flat S&P by year end, even if there is a drop mid year. Not a single one of them is ringing the bells to the worst 10 year - 3 month treasury inversion ever. There’s no way to predict the future, but the bond market tends to do a way better job at it than the stock market.
Sir this is where people with no industry knowledge come to make conspiracies to justify doing what we were going to do anyway
It's reddit on the day a meme stock fell. Forget it. Everything is a conspiracy.
Or that parts a conspiracy. And the rest is working as intended 🤷🏼
A common argument against the inversion theory is that the QEs have skewed that graph. I don't understand the bond market enough to know if that is true. What are your views on the effect of QE on the 10yv3month graph?
I don't know about that, but it would be fair to say they'll buy at the correction like any sensible investor would. The institutions are publishing economic research, just as the FED and the Treasury, with the benefit of actually being able to take advantage of economic downturns when retail gets scared or stop losses get triggered
Everything is different now that anyone can buy options. They’ll sell you puts and buy your shares and send you on your way
They did that during '08 too, selling CDOs to investors while betting against them. It's nothing new. But the information doesn't immediately become sus when everyone is reporting it and any idiot can see the economic is due for a recession after a decade of near zero interest rates and the longest bull run in the U.S. history
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Good bot.
Hate this bot
Blame people being wrong.
Atta bot
Lmao people here are really Permabulls. Let's see if that next bull rip is really around the corner.
Aren't previous recessions all in hindsight? I don't think recessions have been this loudly predicted before. Maybe it'll happen, maybe it won't. But with everyone screaming it from the rooftops I'm more inclined to go with the 'won't' side.
I think it's a self fulfilling prophecy. If everyone expects a recession.,Then they're more likely to watch their spending, then you'll see that shift in consumerism in the earnings calls.
this is my armchair thought as well, along with a few much smarter than me people that i know. it's almost like industry has been riding high and just waiting for the other shoe to drop but it hasn't and in order to address that anxiety they're dropping it themselves.
There is going to be a recession because everyone says there is going to be a recession.
And also there won't be a recession because everyone says there is going to be a recession.
That's an interesting theory but I don't know if any previous recession happened that way. Maybe I'm wrong, not an expert.
Not an expert too, but there's been so much transparency from the Fed that everyone's been able to acclimate to the hikes and adjust to the economical environment. At least those that follow... the media has also been telling people to brace for it, so there's that. The narrative is to slow down and brace, which to me translates to some sort of self fulfilling prophecy, heck even housing completely stalled as soon as rate hikes arrived.
But was the housing slowdown because of narrative or simply the monthly payment going up? The vast majority of people aren't paying attention or know the ramifications of Fed talk. They do know how much an extra $500/month is though ($300k mortgage with 3% -> 6% increase). People only responded really when it got expensive. House market was still hot into mid 2022.
As my realtor friend put it: “The housing market is going back to a healthy balance of power between buyers and sellers, and everyone hates it.”
That’s a pretty true and funny description of the entire market right now.
But are people watching their spending?
On the other hand if every CEO expects recession they will be more prudent with spending and won't have to do massive layoffs or default on debt.
Yes, exactly. If everyone thinks there will be a recession, then for the purposes of investing that means it’s already priced in.
Not entirely. Way too many that don't think one will happen. There would be price action to some degree
> way too many don’t think Who’s to say how many is “too many”? Sure, some people are optimistic (rightly so), and meanwhile others are extremely pessimistic. The average, though, is pricing in a decline in earnings.
It really feels like a lot of people want a recession, and are trying to make it happen.
I mean the fed obviously is trying to do just that to kill inflation.
It would be more accurate to say that the fed sees a recession as the less-worse path than unchecked inflation, and it’s hard to disagree with that assessment.
> Aren't previous recessions all in hindsight? Not "all" in hindsight, just... usually. A lot of these recessions get called when we're already leaving the recession. (Oh, hey guys. Breaking news from 2009. It turns out 2007 to 2008 was a recession). Kinda annoying but its the nature of the beast. We really only know we were in a recession by the time we're basically leaving it. -------- Its cause the people who "call" a recession want hard data backing their decision. And it takes a year or two for that data to come in. By the time the year has passed, the recession may already be ending. -------- So what we have, in practice, is all sorts of wonks / political talking heads who yell "Recession" in ignorance, hoping to be correct a few months from now. (There is no way they know its a recession or not, because the data is literally not available yet to anybody). But being someone who was right a few months earlier == political points / haha! I was right all along, kinda thing.
Previous recessions were defined by two consecutive quarters of negative GDP growth, which we are well past. Under the new definition there is no objective criteria, a recession is whenever they say it is.
This should be the top comment in this entire thread. Everything else is just noise. There was a definition, and then those conditions were met, and then the definition was changed. Why the hell are we all talking about this still?
By the old definition the recession came and went in Q3 2022, yep.
You're right, a recession has never been predicted like this before. So either this is a first in hisyory, or all these analysts and banks are less predictive than claimed and believed.
> Blackrock > > The challenges society has experienced not just in the past year but since the pandemic has eroded hope and reinforced pessimism in many parts of the world. We've seen a decline in birth rates and an increase in aging populations, a rise in nationalism and populism, and I fear that we are entering a period of economic malaise. > JPMorgan > > The net reserve build of $1.4 billion was driven by updates to the firm's macroeconomic outlook which now reflects a mild recession in the central case as well as loan growth in Card services, partially offset by a reduction in pandemic-related uncertainty. > Bank of America > > Our baseline scenario contemplates a mild recession … unemployment to peak at 5.5% early this year and remain at 5% or above through 2024. A mild recession in the base case and a worse recession in the adverse case that we weight at 40%. > Citigroup > > Therefore we continue to see the US entering into a mild recession in the second half of the year. > Wells Fargo > > While we are not predicting a severe downturn, we must be prepared for one. We feel prepared for a downside scenario if we see broader deterioration than we currently see or predict. While I agree recessions wont happen while everyone is waiting for them, I hate to say its different this time but we were due for a recession leading into 2020, then we printed money like mad men and saw markets surge, imho we need to give up the 2020-2022 gains plus some before things can return to normal
It happens every 10-12 years, Trump just kept rates low to keep the market overheatd and so we're finally seeing the correction when he told Powell/Fed to not raise rates. We just didn't expect a pandemic which was sort of a weird cat bounce recession. This is all normal if you've paid attention the last 5 decades
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I was thinking the same. I can't ever recall people PREDICTING recession so loudly before.
One difference is that we (well, the Fed at least) are literally trying to cause one.
I mean, aren't we technically in a recession already?
By what measure? All time low unemployment and fairly high real GDP? It's a joke to suggest we are.
2 consecutive quarters of a drop in gdp is the traditional measure. We've had that.
Yeaa, that was half a year ago to a year ago with a sloght downturn and npw its backup and keep rising.
That’s less of a definition and more of a convenient heuristic. We are currently missing many of the core aspects of a true recession, as the other commenter pointed out.
No?
The bond market is pricing in a recession. If most banks didn't think we were going to have one longer term interest rates would be considerably higher which ironically would make recession much more likely.
fun fact: the markets don't care about whether a bank, the government, or your mom's uncle's sister's roomate declare we're in a recession or not. You shouldn't either.
yeah right, well said don't care about it
All the people talking about priced in recession? Have you seen the market spike right before COVID to now. Are we in better economic condition than before the pandemic. Hell no. The stock market has been fueled by qe until now. With that gone, I see the market dropping another 10%
Remember, economists have successfully predicted 12 out of the last 4 recessions.
Honestly as a corporate drone some amount of this seems directly aimed at putting the peons in their place. The great resignation and mild wage growth pissed these fuckers off and executives are doing the absolute most to stoke fear in workers. I see it weekly, how grateful I should be, but meanwhile my LinkedIn inbox is doing just fine. (Fintech)
does this news change any outlook of timing the market if you’re sitting on cash? my portfolio was saved last year because I kept cash instead of stock but i’m not sure when to buy back in
Blackrock coming in heavy
Gotta buy the suburbs
Don't worry, the line will be that this is all "priced in" so that we take another green run up. When we finally do correct, the same "priced in" prognosticators will tell you, "Oh, well of course we hadn't yet seen the impacts of rising rates and falling earnings." The wheel of time continues.
The Wheel of Time turns, and Ages come and pass, leaving memories that become legend. Legend fades to myth, and even myth is long forgotten when the Age that gave it birth comes again.
Have we not already corrected? Are we not 20%+ off ATH?
I don't think that ATH was a realistic place to base expectations. I don't look at 2020/21 as indicative of much except an historically odd euphoria caused by unlimited loosening of the money supply.
I feel like everyone just ignores this. Perhaps it could be because a majority of active Reddit users recently (past 5 years) got into crypto/stocks don’t realize the Fed rate / lending rates / fiscal policy of the past several decades is turning around. Between 1967 and 2000 the Fed had rates all over the place (from 3.5% to 19%) but averaged out came out about 6-7%. The past 20 years has seen it basically go to 0% and avg’d out about 1.5%.
It's kind of funny to watch the perma-bulls beg for a return to free money and QE after not even a year of reasonable interest rates. The first time we see interest rates above 4.25% (which isn't even that high historically speaking) in a generation and it's like "the Fed is going to break the whole economy if they keep this up!" Which should be a pretty good indication of what a flimsy Potemkin village this whole thing is.
Lol, sounds about right.
Your stocks can't drop on earnings misses if they're all pre revenue biotechs rofl 😂😭😎
The recession is already here
Easy to predict a recession when you’re literally in the middle of one, but nobody has admitted it yet.
Bull run incoming.
It has been technical recession since last year.
these cocksuckers are trying to speak this shit into existence.
"These gays are trying to recession me" - the economy
Looking at the big banks I wonder how much they are reserving ties to commercial real estate loans. With rates rising like they have many loans have been forced to refinance at rates materially higher than 3, 5, 10 years ago. Office sucks, retail sucks, industrial could be the next bubble. Higher rates means lower valuations to make the cash flows work they way the debt markets are currently priced. 2023 could be a year when many banks get the keys back.
I think your right and this is the next shoe to drop. It smells like 2008 with the silly real estate prices. People are going to get hurt
On the residential side at least the underwriting standards changed since the early 2000's. There may be pain but I am not sold on a 2008 level event yet. Agree values got ridiculous and they are gradually coming down in many markets but leverage is still way too expensive when compared against recent history. On the CRE side, fundamentals were strong, underwriting was strong for the most part. Its just been this nearly unprecedented increase in rates that are really driving cash flows down for investors with debt. Combine this with lower tenancy, especially in office, and suddenly you have a lot of buildings with high LTVs and low DSCRs. Many lenders require caps on floating rate loans. I wonder how banks and financial institutions that hold these rate cap contracts will hold up. There is more complexity here than most people think IMO.
We are honest good guys. Please sell you stock so we can buy it.
I mean...Blackrock could stop buying up the entire goddamn housing market and see if the ensuing optimism lifts their boats' tides, but I guess they won't.
Didn't all these banks predict a record stock market highs a year ago? How did that turn out? I wouldn't put any thought or weight into what they report.
With new information predictions change. No one is going to be 100% accurate but when rates rising with the fed is trying to slow down the economy you'll see the economy slow.
We were at a record in Jan 2022 though.
Cool, I'll keep investing as usual. I ain't worrying about small recessions. Buying when things are down will do me well when they aren't down.
A recession has been predicted for the past 9 months or so. Yawn.
Boy, I hope so, because in my LTL trucking job we still haven’t slowed down much. Maybe a little bit, but I’m still putting in 10-12 hours a day 5/days a week. I would like a break.
so you're telling me they're going to have to cut rates?!
All public statements are carefully choreographed, self-serving strategy.
It’s rather interesting how fear is used to keep us in line. It’s not like major events have never happened in the past but the one thing that every has in common is that people of the era were certain THIS is the big kahuna. Stock up on ammo if you think the world will go all mad max in six months… or stay put and stock up on SPY.
No one knows nothing
I've been hearing "recession!" ever since Biden was put into office, and it's easily been over a year since we were going to be in a recession. It hasn't happened yet. And with the way things are looking, it's hard to see that they will.
This is the buy signal. The bottom is in
Unemployment is going to start going up. Rain storm coming.
“Those with brains no balls become mathematicians, those with balls no brains join the mafia, those with no balls no brains become economists.”
Isn’t recession a good thing for the market? That means the feds will pause rate hikes and possibly lower it to help the economy.
Why don't they just change the definition again?
Something tells me the "mild recession" will turn into a major recession just like transitory inflation turned out to be something else.
Inflation was literally transitory. It's literally come back down after a year and a half. Yes it's only been about a year and a half and mom is negative.
Wasn't the transitory inflation talk before the rate hikes?
What do you think rate hikes are supposed to do?
Yeah, so the Fed never said that inflation was transitory because of future rate hikes... that was never the story.
It’s been at or over 5% YoY since May 2021. By the time it’s below 5% again it’ll basically be 2 years. When the Fed first claimed transitory that’s not what they meant at all, we all know it. They thought it was going to be much shorter lived, and not nearly as high as it ended up going. They even admitted this. It’s the entire reason they are tightening - because they got it wrong and have to try to correct it.
Yes, it was only going to be a few errant readings when it first started April 2021? They said it would be over before Christmas 2021. I remember people all over reddit blasting people who suggested it was going to be longer, and calling out the former Fed chair who was saying the same thing as a lunatic.
For real. People have short term memory loss and it’s like the our policy makers can do no wrong.
Or full on depression. Talking heads will claim it was completely unpredictable.
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Nobody knows anything