This Bear market

[winner69]

All this talk of recession .... what recession

ANZ / Westpac not forecasting any recession this year ... and neither are a few other research places

So no worries .... people shouldn't read Stuff and watch the TV news ..... just spreading gloom

[Beagle]

Good post LEK and agree.

I see that need to get back to some sort of global normality, but for this need China to ease off the Covid zero-policy, and a ceasefire or the like in the Russia/Ukraine conflict. Essentially some way of the situation changing or reversing, but with both "saving face". Don't know how likely that is.....

Unlikely anytime soon. Comparing the seriousness of those two issues in terms of economic impact I'd rate the War a 10/10 and the China covid zero policy tolerance a 2/10.

Its coming Winner...my nose for trouble coming is very rarely wrong.

[winner69]

Jeez LEK .... so many 'Most assume' bad things

Unlike you to be so pessimistic

[Rawz]

If you were 40 yo, down 5% maybe from buys you've made over the last 1-2 years and didn't need the money until retiring, what would you do?

Sell a pump a sit in cash?

Personally I think the the time for, ‘timing’, the market has gone. We are sufficiently deep enough into this bear market that I reckon it’s now a matter of holding and reinvest all dividends or pump spare income into the market to avg down. If you didn’t get out on the top it’s likely you won’t get back in on the bottom..

For me it’s also time to reflect on the companies in your portfolio and their management and ask yourself if you still believe in their strategy and ability to navigate through this inflationary period. Is the balance sheet strong??.. is another key question.

[allfromacell]

Some people think that its best if you are always 100% invested in shares and timing the market is impossible. I don't subscribe to that theory. There's tens of billions in Kiwisaver funds. I think there's still a lot of people that have yet to, but will come to the conclusion its best to switch to a cash or conservative fund to weather this storm and all those "switch" requests will keep the selling pressure on the market darling growth shares on the NZX that those Kiwisaver funds love to hold.

The only problem with that is not only do you have to beat the market, you have to beat it consistently and by a significant amount in order to outperform the tax bills.

Simply holding and adding will always leave you at par with the market and even better off if you up the regularity of your buys during bear markets. A lot less stressful in my opinion and less time consuming.

Selling now is too late anyway, it's such a crowed trade and the market usually bottoms long before the economic situation does, after all a poor economy is usually followed by interest rate cuts.

Obviously timing the market can be incredibly profitable but for the vast majority of people they cannot do it consistently, humans are emotional and most people are much better off holding and instead investing less of their overall wealth in equities if they can't stomach the volatility.

[alokdhir]

Guru Lister said that when market reverses ...average 17.6% returns are made in first month ...so its better to stay invested now then panic and sell and try to time the bottom

[SailorRob]

No one is bullish. Absolutely no one that I can see at least.

Everyone assumes there is no end in sight to the Ukraine war.
Everyone assumes inflation will continue to run hot for the rest of the year.
Everyone assumes very large central bank rate rises still to come to curb inflation at any cost.
Everyone assumes energy prices will remain high, even with reduced demand.
Everyone assumes House prices around the world will continue to deflate.
Most assume recession is inevitable.
Most assume China will continue its covid zero policy and will continue with city wide lockdowns.
Most assume supply constraints will continue.
Most assume company earnings will decrease, even for those companies with pricing power to increase their pricing along with inflation.
Most assume the strong, healthy labour market wont last, with layoffs and slower hiring to come.
There is also much fear about one of three possible extreme outcomes also occurring, any of which would lead to a big nose dive in markets (1: Putin going Nuclear, 2: Xi invading Taiwan, 3: A new much deadlier CV variant)

So it seems likely we are in the most pessimistic mode currently.

Will be interesting to see what happens the moment we get just one good piece of major news.

(Personally I would guess a cease fire in Ukraine would be a big turning point in sentiment - and could happen at literally any time. I think the covid policy of China is likely to change post the 2022 CCP congress later this year, which is the most important event every 5 years in chinas political calendar - its where Xi will either increase or decrease his ruling power. I imagine covid zero is abandoned after that)

Excellent post.

You me and Warren are the only three in the world that have no clue about where markets go next.

What track record do all the people expressing such sure opinions have regarding market timing?

[SailorRob]

The only problem with that is not only do you have to beat the market, you have to beat it consistently and by a significant amount in order to outperform the tax bills.

Simply holding and adding will always leave you at par with the market and even better off if you up the regularity of your buys during bear markets. A lot less stressful in my opinion and less time consuming.

Selling now is too late anyway, it's such a crowed trade and the market usually bottoms long before the economic situation does, after all a poor economy is usually followed by interest rate cuts.

Obviously timing the market can be incredibly profitable but for the vast majority of people they cannot do it consistently, humans are emotional and most people are much better off holding and instead investing less of their overall wealth in equities if they can't stomach the volatility.

The biggest issue with being able to time the market (and Buffett has never met anyone that can) the issue is that you become a billionaire reasonably quickly and that becomes socially awkward in New Zealand.

[Rawz]

Due to most govt balance sheets around the world swelled to the brim with debt and no way service that debt with higher rates.. i reckon central banks will talk the talk about QT and raising rates (to reign in inflation)... but in reality they wont be walking the talk.

Instead we will have higher than normal inflation for longer than normal and real rates will be well negative.

Cash is trash and a lot of stocks will perform just fine through this

[Beagle]

I reckon Cash is King and a lot of things, (not just shares), are going to be a lot cheaper next winter than they are now. Seeing some huge drops already in the cost of a nice holiday home in Taupo now compared to last summer. Early days though. I'm thinking, holiday homes, boats, that fancy luxury European car, campervans and most shares will be cheaper in 12-18 months time. You only lose with cash and inflation if what you are thinking about buying in the future is going up.
Hide from the Bear and when (s)he's done some serious damage pick up some bargains, that's my strategy.
I don't think the Bear we face is bluffing like this one, https://www.youtube.com/watch?v=UCBj9zCQVu4