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Many of the points you raise are why I wanted to share the interesting stock market fact that since 1946, stocks were higher 12 months after every single midterm election.
But records are meant to be broken, and as Mark Twain said, "There are three kinds of lies: lies, damned lies, and statistics."
I could certainly see stocks higher again. But not necessarily recovered to our previous peak. We are over 16 months out from 12 months after the 2022 midterm elections. At that point the current bear market would be over 500 days long thereabout?
This time is different because of the FED. The midterm elections are one thing, but we have way more stuff going on right now that super-cedes it. The FED and QT are dominant right now in driving stocks. Russia-Ukraine, Oil, Inflation, etc. All more influential right now than the midterms. Maybe that shifts a bit later this year, but I think the FED/QT will remain the dominant factor on stocks for the foreseeable future.
Agreed-
NO ONE is even talking about the massive QT underway. The Fed accumulated $9 trillion in bonds on its balance sheet and is going to unwind those positions, $1 trillion each year.
People don't seem to understand the tailwinds that drove stocks to irrational levels (QE, low interest rates, low inflation, strong economy) are now strong headwinds. Again, NO ONE is even talking about QT, which is the first time in history we have seen such massive QT.
It is weird, but for these huge threats facing a still grossly over valued market, very few people seem to be very concerned at all about the tsunami headed for our stock and housing markets. It is though everyone is concerned only about inflation and interest rates- that's it!
Well sure, you know eventually it will recover and produce a nice profit. It just all depends on how long you're willing to wait. Maybe a year, maybe 10 years? That might be fine if you're in your 20s or 30s, but if coming close to retirement age or already in retirement, that's not such a good deal as you may be dead before it recovers.
Well, my kids will be very wealthy should I croak before the market recovers!
But don't you receive dividend income?*Would you advise an investor sells their dividend stocks during this downturn, even if the dividend income covers that investor's living expenses?
Or would advise buying more shares to increase said dividend income?
I could certainly see stocks higher again. But not necessarily recovered to our previous peak. We are over 16 months out from 12 months after the 2022 midterm elections. At that point, the current bear market would be over 500 days long thereabout?
The S&P 500 hit an all-time high of 4,818.62 on 1/4/22, so the clock technically starts on 1/4/22 for the current bear market.
Nobody knows the future of course, but for planning we need to make assumptions, that is just reality. Here are some projections I am making for the SPX:
2022 - 2026:
Cap growth: 0% (i.e. SPX will reclaim current all time high of 4796 by Jan 2027)
Dividend yield : 1.3 - 2% (remaining constant in dollar terms at 1.3% in Jan 2022)
2027 - 2029:
Cap growth: 4%
Dividend yield: 1.5%
2030+:
Cap growth: 5%
Dividend yield: 1.3-1.5%
SPX key levels: 4796 > Jan 2027 6000 > Jan 2032 8369 > Jan 2039 10,173 > Jan 2043
Nobody knows the future of course, but for planning we need to make assumptions, that is just reality. Here are some projections I am making for the SPX:
2022 - 2026:
Cap growth: 0% (i.e. SPX will reclaim current all time high of 4796 by Jan 2027)
Dividend yield : 1.3 - 2% (remaining constant in dollar terms at 1.3% in Jan 2022)
2027 - 2029:
Cap growth: 4%
Dividend yield: 1.5%
2030+:
Cap growth: 5%
Dividend yield: 1.3-1.5%
SPX key levels: 4796 > Jan 2027 6000 > Jan 2032 8369 > Jan 2039 10,173 > Jan 2043
Too pessimistic? Or sounds about right?
Time will tell, and you have a thoughtful approach.
Since WWII, the '73-'74 bear market was the longest to recover. It wasn't until 1982 (for a total of 2,114 days) that the market reclaimed the prior high in '73. That's nearly 6 years!
I personally voted for a shorter recovery than 3+ years.
The average recession lasts about 12 months so would expect the market to be recovering by the end of the year unless they do something else dumb that sets the process back.
NO ONE is even talking about the massive QT underway. The Fed accumulated $9 trillion in bonds on its balance sheet and is going to unwind those positions, $1 trillion each year.
People don't seem to understand the tailwinds that drove stocks to irrational levels (QE, low interest rates, low inflation, strong economy) are now strong headwinds. Again, NO ONE is even talking about QT, which is the first time in history we have seen such massive QT.
It is weird, but for these huge threats facing a still grossly over valued market, very few people seem to be very concerned at all about the tsunami headed for our stock and housing markets. It is though everyone is concerned only about inflation and interest rates- that's it!
IMHO the price of fuel is another factor. If you pay $5.00/gal for 20 pay $100 at the pump. Some will pay the price. Diesel @ $6.00/gal for 200 pay $1200 to fill your truck. Some independents may be priced out of service. More disruptions in the supply chain at higher prices. Don't see any action to improve fuel supply.
I posted this S&P 500 historic chart in another forum. This was taken ending at the beginning of 2022.
If history is an indicator, I'll use the example of the run-up in the 90s, then the "crash" in 2000 to see when it recovered.
If you take the 2000 high, you'd see the S&P didn't come back until year 2008 but only briefly. So effectively it did not fully recover to the 2000 level until the year 2013. So effectively it took 13 years to recover. The QQQ took even longer.
Now the question is how low will the S&P go?
If you look at the run-up on S&P since 2020, there is no support level until you get back to the March 2020 dip, so a realistic support level says S&P will be at 3,000, that's a 20% drop from today. The next support level is even lower at 2,000.
Another theory is that all the liquidity the Fed has been pumping into the market since 2008 needed to be taken out before the market hits the bottom. That's a lot of liquidity going from QE to a QT !
Location: Was Midvalley Oregon; Now Eastside Seattle area
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@HB2HSV
my thinking too and Scared. Tuesday 06/22/22, 11am PT; $SPX@3771, +98.
However, I am buying on significant dips to have a lower ave cost, if the purchase make a significant impact on my ave cost. I am nearing the point where my purchases are not making enough change in the ave cost.
I will either have to find new stock to buy or hold cash.
Discretionary trading accounts.
YMMV
Last edited by leastprime; 06-21-2022 at 12:24 PM..
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. Tuesday 06/22/22, 11am PT; $SPX@3771, +98.
