A lot is tech driven so you live by that sector and die by it. Big volatile swings. Read that the Fed could cut interest rates in Sept. See how the market responds.
Stock market near new record highs
- Thread starter bdroc
- Start date
I notice that no one has been beating their chest about the stock market the past few days. Hmmm....
Ya market goes up and down and same db post when it fits their agenda. Long term it’s been doing fine
Dave, that's a lazy post (pun intended). You can look in this thread and see that I was posting even on the day earlier this week that the DOW was up really big. I've focused on the 4-year returns because there is a very easily discernable inflection point a little over 3 years ago that correlates to the massive fiscal stimulus in a rapidly rising inflationary cycle. It was economic malpractice at best. It really defied reason and the results since have been significantly below historical average for annual inflation-adjusted ROI (how much each dollar invested can actually buy).
You have to realize that probably 96.8% of your posts WRT the stock market have a negative connotation. I don't disagree with your premise, but it's childish to say I'm lazy (yay for puns) because I didn't credit you for the one or two posts you made that weren't fully negative out of the 614 under this screen name and the thousand plus others under your other handle(s).
Now you are changing the accusation. Before you stated that I only posted when the market was negative. That clearly isn't true. You can see that in my early posts in this thread on up days in the market.
And most of my posts on the market are not negative. The majority are even handed. I often show a comparison of inflation-adjusted ROI (well below average) for 2021 through 2024 to inflation-adjusted ROI (well above average and a record for the 4-year return of the NASDAQ) for 2017 to end of 2020. I'm showing both good and bad inflation-adjusted ROI and if people care to dig deeper, I give some analysis of why from a macro-economic perspective.
lol you started a thread called “Does the Market Ever go Up”. You are very dishonest
I'm not changing anything.
Do I need to quote the negative?
You have good information that I like to read, but you are a pain to respond to. Even more painful when you recycle and regurgitate the same thing over and over.
Dave, I like you as a poster, but it is clear to for anyone to see that you started by saying I never post about the market on days when the stock market is up. I then proved that I did in this very thread. And I've done that before quite a bit because my focus is on longer term performance, not day, week, month but several years.
So then you pivoted to accusing me of only posting negative about the stock market. I've tried to explain that I've shown the actual results over the 2017 to 2020 period (very positive) and the 2021 to 2024 period (not so good) which is even handed. All I'm doing is taking the actual results and comparing them to the historical average. That's about as honest as you can get, and the focus is longer term (several years of data). It's simply what the results say compared to historical returns. I'm not going to deny reality to save some people's feelings. The results are the results.
Fair assessment. I do wonder though if the longer-term increase in PE is sustainable or if it reverts to the mean. If you look at the historical PE chart, we are on the high side. But if you look at the last 40 years, and insert a linear trendline, there is a clear upward trend that has held since then that we currently would be below. I have to do some more research to determine my position on this question. https://www.macrotrends.net/2577/sp-500-pe-ratio-price-to-earnings-chart
Edit, OK, I've graphed the PE ratio relative to the S&P (also the FFR and inflation) and have noticed a pattern in the PE ratio that has held for awhile.
1) It spikes with each recession. Earnings drop faster than stock market prices. Then as you pull out of the recession, the PE ratio falls for another 2 to 5 years. It's like the stock prices are overly cautious post-recession to reward the improving earnings from the recession lows. Stock prices rise post-recession, but not as fast as the earnings.
2) PE tends to rise leading into the recession. It's as if earnings begins to slow but investors don't catch on until the PE ratio has risen too high and then it continues to rise through the recession as earnings fall faster than stock prices.
3) For the market aggregate, earnings appear to lead and stock prices follow with as much as a couple of years of lagging. Don't get me wrong, earnings and stock prices appear to share the same inflection points historically. But the rate of change is what lags. PE ratio is at least partially a function of where you are in the economic cycle. So to me it doesn't make sense to view PE ratio as only a historical average for comparison.
You have to analyze where you are in the economic cycle to understand the PE ratio. And in some ways, the PE ratio foreshadows the next phase of the economic cycle and therefore the direction of the broader market. SEP2022 marks the PE bottom post the pandemic recession. It's been climbing since as investors regain their confidence. My guess is it continues to climb until after the next recession, whenever that occurs.
4) Also, I am noticing that economic expansions over the last 40 years seem to be for longer periods than periods prior to this. This may be a function of the maturation of our economy and certainly correlates to lower average inflation and FFR over this period. Of course, we just experienced a very extended period of very high inflation, but relative to the 70s/80s, we are in a better position there now. What we have experienced over the last 4 years is still a significant setback to strong and even steady growth, kind of a throwback to the 70's/80's style stagflation but on a lesser scale.
5) Projections (and I am not an economist, just have taken several econ and finance courses and am a scientist by formal education): I suspect PEs continue to trend upward and so does the stock market for at least a few years with inflation remaining a stubborn thorn in our side for a year or more longer. It may have gotten a bit frothy lately and hence this week's strong pullback. Then I suspect inflation returns to the Fed target particularly if we get a change in fiscal policy that is less stimulative and less combative with the Fed's monetary policy after the election. This would result in a little more stable growth and some improvement in things like real wage growth and inflation-adjusted ROI that would benefit from lower inflation.
6) I still need to look more in depth at the money supply to inform my projections better. I think I heard that it is starting to grow again, but I want to look at the full data going back to 1950 or so. I also am concerned about the FED prematurely and IMO foolishly cutting rates perhaps from political pressures of election season. I don't see any benefit to that right now. Inflation is still running 50% higher than the FED mandate and cuts could very well rekindle increasing inflation. I'd like to stamp that out or at least back to the FED mandate of 2% inflation before we talk rate cuts. I think that would be the responsible thing to do. So if they cut too early, they may spark re-inflation which could lead to another recession.
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I read that a Sept rate cut could be coming but no guarantees. The Fed (Powell) has been cautious about rate cutting over the last year so I don't think they will do anything too premature that could set us back with inflation. The CPI for all items on a seasonally adjusted basis declined in June 0.1% vs May which was the first monthly decline since the pandemic. I would think we need to continue to show progress with the CPI before rates are cut.
On the market performance. I am thinking there could be a pullback in the next 6-12 months but then again you have the possibility of rate cuts and an election that could swing the market. I do not see a recession on the horizon but what do I know.
You also need to look at sectors within the S&P that are driving high PE ratios. I know tech has been the leader in this mini pullback this past week so moving forward that sector may continue to be down.
I still have plenty of inflation concerns in the short and intermediate. Gas price surge recently will flow through to some extent on inflation numbers in future months. And after the election we are going to have to refill the strategic oil reserve which is criminally low to artificially lower gas prices right now. That will drive gas prices up further. I also have learned not to trust the jobs numbers. They are playing games with those numbers. But I think even the Fed no longer trusts those numbers on face value.
You may be right about a pullback, particularly if rate cuts come too soon. I think that is more of a short to intermediate thing. And you are likely also correct that it would be more sector dependent. It amazes me how much investment was concentrated in NVDIA and a few others while entire sectors like for example, American EV companies were completely gutted. I get that NVDIA was performing and has awesome potential and that many EV companies were more theory than practical, but you would think with all that green energy stimulus that almost every American EV company wouldn't be down 95% to over 99% in market cap.
Small caps in general have been severely punished for about 3 to 4 years. And there finally appears to be some rotation into them but dang, the Russell2k is still down at least 25% on an inflation-adjusted basis since JAN2021. That just isn't a market lag, it is a bludgeoning. I get that since the pandemic there has been market share moving to Amazon, Walmart, and other online and mega-companies, but the entire small cap world has been shunned it seems.
They won't cut rates prematurely and drive inflation. That would be beyond dumb. Not sure the Fed will wait for it to hit 2% though. They want to see a sustainable path toward 2% but not actually hit 2%.
The S&P is up 16% YTD so we could see a pull back from that for the balance of '24 driven by tech. Other sectors could be fine but again you have rate cuts possibly looming. The underlying driver of that is inflation data so if that continues to improve then that will bode well for the markets. Then the election which may not really swing the market much. Note: I don't want this thread divng back into politics so just staying away from commenting about the election.
I don't share your confidence in the FED not cutting too soon. This FED kept the FFR under 1% until FEB2022 when inflation hit 8.54%. If it took that look for them to do the right thing just 2 years ago, why would we expect them to do the right thing now? Remember the inflation is transitory line? They rode that all the way up to 8.54% before they even started working on it.
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You should thank whoever was in charge of the economic decisions "a little over 3 years ago" for dealing with the underlying economic issues that threatened the overall health of our economy in a way that only led to this minor blip ... instead of repeating your same wrong-minded message hundreds of times, as a troll is wont to do.
I post in hopes it turns around today but I notice that for all of those that falsely claim that I don't post when the market is up, there sure is radio silence here when the market is dropping like a rock. Starting to look like the NASDAQ could possibly end the year at a negative inflation-adjusted 4-year return.
Big tech sell off so again look at sectors and hope you don't have your whole portfolio in tech. S&P still up like 15% YTD. Focus on inflation data for June releasing on Friday, hopefully another month of improvement. Stock market a looooong term play, getting wrapped up in a day or a week or a month or a year is just too shortsighted. Last 5 years up around 80%.
When I got the notification that you had posted in this thread, I knew the market was going to be down today. I looked to confirm.
So why don't you and others cheerleading post when it goes down? I post on days that it goes up. You can confirm that by reading earlier posts in this thread.
I fail to see where I cheerlead anything.
The 1 year high and low is 56xx and 41xx. You most certainly have posted more on the negative days than the positive ones regardless of your own opinion of it. You once started a thread "does the stock market ever go up?"
Did you not?
I'm probably more aligned with you than all of your detractors combined, but your attitude is just super arrogant and annoying.
The PE ratio on the S&P 500 is ~ 27 even after the sell-off. That's the biggest reason for the recent decline.
I still expect corporate profits to be up 10% year over year. The problem is stock prices got too high.
I call this the EdwardoCarrachio indicator. When he posts, it’s usually a great buy indicator.
I always look longer term and have very consistently posted data as of JAN2021 and JAN2017. It makes a lot of sense to look on these timelines as it is reasonably consistent fiscal policy over those periods.
As of this minute, DOW is up only 1.4% on an annualized inflation-adjusted basis since JAN2021. It was up 12.03% on an annualized inflation-adjusted basis from JAN2017 to JAN2021 even with pandemic shutdowns hurting the performance.
The S*P is up 5.0% on an annualized inflation-adjusted basis (about half of the historical average) since JAN2021. It was up 14.78% on an annualized inflation-adjusted basis from JAN2017 to JAN2021 which strongly outpaced the historical average.
The NASDAQ is up 1.23% on an annualized inflation-adjusted basis since JAN2021. It was up 32.53% (the highest on record for any 4-year period in the history of the market) on an annualized inflation-adjusted basis from JAN2017 to JAN2021.
The Russell2k (small caps) is down 6.31% on an annualized inflation-adjusted basis since JAN2021. It was up 13.25% on an annualized inflation-adjusted basis from JAN2017 to JAN2021.
Here's the deal and Lazy Dave's point. You started a thread with your old screen name Online Persona when the market was doing terribly. It was titled "Does the market ever go up" or something very similar to that. You were quite active in that thread. Then you got mad at the board or bored or whatever and you dropped out. You then reappeared maybe 6 months ago (not sure) as Edwardo Carrachio.
You did not start this thread because it probably is worded too positive for your liking...."Stock market near new record highs". You made some comment at the beginning of the thread that stated something like "finally there is a topic that I am interested in". To me, this comment alone is freaky because this is a Penn State football board and apparently one of the few topics you are interested in on the board is about the stock market.
So now we have this thread and your comments are generally negative about the market and our economy. Have you posted when the market has been up? Yeah, you probably have. I have not gone back and analyzed that. You definitely seem to make a point to post when the market is way down like today. And I share Lazy Dave's sentiment that when I see you posting in this thread I don't need to check the market to know it will be significantly down. So in summary, you probably have posted when the market has gone up but you post a lot more when it is down.
I do post when the market is up because a single day or even a month takes a backseat to several years' performance. That is what I consistently monitor and post here. It's less about the day to day. But on days like this, I'm down many tens of thousands of dollars on paper. That might impact my short-term outlook because it is so immediate, but I make decisions based on and I post here about several years' worth of data. I'm not a day trader. I'm an investor.
Perhaps the reason that you perceive my responses as more negative is that the last 3.5 years, every index is performing well below historical averages. There is legitimately a chance if we experience even a slight pullback that 3 of the 4 market indices will end an entire 4-year period in the red on an inflation-adjusted basis! And the 4-year period prior to that was remarkable good. I'm not the type to sugar coat things. I do occasionally post that we are doing better than say 2022 in returns, but that is the type of response that a mom might tell a kid that just came in 2nd to last. Wow, you aren't last this time! I'm not Ricky Bobby, if you ain't first you're last, but I'm not going to pretend that barely positive ROI on an annualized inflation-adjusted basis is good. If this continues, most Americans will never be able to retire.
And I do post PSU football, basketball, wrestling, baseball, etc. But lately I cannot even do that without being attacked because some that lean a certain way politically know that I lean the other way and they simply aren't tolerant of other views. It's gotten to the point where now I'm finding great free PSU sports content that I no longer share here because I will be attacked for it. I used to start a number of PSU sports threads and add a lot of content that I've found out there that was interesting. But like I said, as long as personal attacks from those who lean a different way politically are the result and amplified by the moderator, why would I post things? It's too toxic if the response to purely PSU sports posts and threads are personal attacks always from the those that have different political leanings and then moderator is threatening to ban you for "attacks" should you defend yourself.
EDIT: BTW, in just the time it took for me to post this response, all of the numbers that I posted above are down strongly. Look at the NASDAQ today. It's down one of those once in many moons type of red. I posted earlier today saying specifically that I was hoping for a rebound. But come on, you have to admit that this crap today sucks really bad. I'll still keep my long-term perspective, but today is one of the worst days in the market in a long time.
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Riddle us this: Why are you using the last 3.5 years and the previous 4 years as your time frames, if this isn't entirely politically driven propaganda on your part (ignoring the fact that you have explicitly stated this is politically driven on the Current Events board)?
As I said yesterday, very real possibility that the NASDAQ finishes the year with a negative ROI for 4-year inflation-adjusted return. It is currently at 0.74% annualized inflation-adjusted return since JAN2021. A little more of a pullback and we would already be in negative territory.
I can't tell you how rare this would be if it happens. I believe it would only be the 2nd time in history.
I can't tell you how rare this would be if it happens. I believe it would only be the 2nd time in history.
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Where do you come up with that?
NASDAQ index was roughly 10,500 on this date in 2020. Now it's roughly 17,700 which is a 68% gain. We had some bad inflation years but it hasn't been 68%.
I assume you're using inauguration day 2021 when the index was roughly 13,500. That's a 31% gain which is far less than 68% but still greater than the official CPI increase.
I use January2021 as my beginning data (or 2017, or 2009) because it marks a point of consistent economic and fiscal policy. It doesn't make as much sense to measure from other points where there are different economic and fiscal policies over the same period IMO. The NASDAQ was 13543 at that basis point. It was 17153 when I posted the number. That yields 26.6% increase over those 3.5 years.
Cumulative inflation since JAN2021 is 24% (it isn't simply adding the yearly inflation numbers, you have to multiply the value of a dollar inflated each year by the previous year's inflated value until you reach the basis.
So the NASDAQ has beaten inflation by 2.6%. If you take this as an annualized return you can do so by dividing by 3.5 years (the lazy and slightly less accurate method as I did, it doesn't make a real big difference for returns this small) or you can plug it into a time value of money calculation where you would get a number slightly lower than what I reported above for the annualized inflation-adjusted return.
Why an annualized inflation-adjusted return? It is a way to measure different length periods by annualizing it, I could use annualized to compare this 3.5 year period to the previous 50 this way or to the previous 4, etc.. And inflation-adjusted because that is your REAL return. I don't just say REAL to satisfy my measure of the return, this is an economics and finance term that specifically is used to measure any data against inflation to give you a real measure. It makes no sense to measure certain things against what a dollar now would buy you in the past, it is what does it buy now after inflation. You invest X dollars and a year, 3.5 years, etc. later, you can buy Y dollars worth of goods and services with the money should you liquidate.
BTW, I see in the time since my first post today that the NASDAQ has turned slightly green today. Let's hope that continues.
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The index was roughly 13,500 in January 2021. The gain since then is 31% which is above inflation. The gain is 68% if you go back just 2 months earlier.
Use the broader S&P 500 index. 4 years ago it was roughly 3300. If you move forward to January 2021 it was roughly 3500. Now it's more than 5,400. Up 62% over 4 years which is well ahead of inflation.
You're being selective with what index and what dates you use.
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Yesterday was one of the most bullish down days in a long time. Turns out that 40% of stocks hit new highs while the overall market was down 2%+. The last time that happened was the 2020 recession low.
This, my friends, is what rotation looks like. The profits from the few biggest stocks are being spread around into the rest of the market.
This, my friends, is what rotation looks like. The profits from the few biggest stocks are being spread around into the rest of the market.
Looks like EdwardoCarrachio is nowhere to be seen today because the stock market isn’t confirming his political biases lol.
I'm not being selective with the index when I report the 3.5-year inflation-adjusted data for the DOW, S&P, NASDAQ, and Russell2k. I have the major indices all covered. I explained above that it is logical to use JAN2021, JAN2017, JAN2009 as start points for data because they represent inflection points in fiscal and economic policy whereby the next 4 to 8 years have consistent fiscal and economic policy.
BTW, Nice bounce back today. Tech is still lagging and didn't recover the massive losses from earlier this week. The long term 3.5-year inflation-adjusted returns are still horrible. But I'll take the little wins at this point.
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