Where are we at in this downturn?

[tede02]

What's your read on the current downturn? Friday felt like people were throwing in the towel...sell now and ask questions later. Futures for Monday and global markets look to be continuing that mentality. The rhetoric from the administration only seems to be fanning more negative sentiment. 

 

I started this slide with a ton of cash. Finally started adding to some existing positions on Thursday and Friday, haven't bought anything new. I remember having a similar feeling in March of 2020...should I be more patient...or should I be deploying more aggressively? 

 

One issue is at the recent high in February, market multiples were rich. Even if the S&P dips into bear market territory tomorrow, it's not going to be cheap. Same issue for my individual holdings. Yeah they are down but nothing is close to the levels in March of 2020 or 08/09. 

 

Finally, it is interesting to observe the market rapidly pricing in the tariff impact. It's going to take weeks and months before the effects show up in any hard data. Maybe we're in a new era and growth rates and earnings through Q1 are completely meaningless as the economy resets to some degree? Then again, I wouldn't be surprise to see a 180 to some degree with the tariffs if public pressure builds enough. But at the moment it appears both the Fed and White House are prepared to take a lot more pain. 

 

IDK, just a lot of different thoughts. 

Edited April 7, 2025 by tede02

[brobro777]

Well I went long NQ a bit ago today, small position here because -19% in 2 trading days and pre market, less than 3 trading days seemed to be getting a bit too stupid. Like, even dumber than some of my favorite Beavis and butthead episodes

 

of course it could sell off more from here and if that happens I'll eat my loss

 

 

[Dalal.Holdings]

A lot of the people in markets today have never lived through a real bear market.

Sorry, March of 2020 was not a real bear market. Real bear markets last much longer than a few weeks.
 

Much much longer…

[LC]

I've got no idea...I mean, it's a fools errand to try and predict the future. Much less the economic future. Much,much less the economic future under this president.

 

My approach is, try to buy some stuff that looks cheap. Save some $$ to buy another day. Keep going till it gets to the point where I've got no more investable cash, and then get creative. And then if creativity gets all tapped out, well, screw it...might as well buy powdered milk and start collecting rain water

[brobro777]

5 minutes ago, Dalal.Holdings said:

A lot of the people in markets today have never lived through a real bear market.

Sorry, March of 2020 was not a real bear market. Real bear markets last much longer than a few weeks.
 

Much much longer…

you right man, sometimes I go back and read my journal entries around the time of SPX 666 in March 2009

 

now THAT was a bear market, total demoralization bear market 

[lnofeisone]

44 minutes ago, Dalal.Holdings said:

A lot of the people in markets today have never lived through a real bear market.

Sorry, March of 2020 was not a real bear market. Real bear markets last much longer than a few weeks.
 

Much much longer…

That's because we didn't really have real recessions. To have a protracted bear market, you need economic contraction.  COVID-19 was a sudden shock to supply chains that had previously demonstrated resilience on the demand side. This led to inflation, but supply chain resilience proved effective. 2008 was a more traditional contraction.  Given the current administration's perspective on the world, it is creating, if we haven't already, a traditional contraction. If futures hold as they are now, tomorrow we will be in an official bear market, and this one might just stick.

[Red Lion]

1 hour ago, brobro777 said:

you right man, sometimes I go back and read my journal entries around the time of SPX 666 in March 2009

 

now THAT was a bear market, total demoralization bear market 

I was putting all my bills on credit cards so I could buy as many stocks as possible at that time. That’s why I see young people talking about losing 20% on a 100k setting them back and I fundamentally see these times as a great opportunity if you either have a bunch of cash on the sidelines or earnings/savings potential. 

[Parsad]

Short-term, I think we're probably 40-50% of the way there before they start making concessions or deals...total drop of 30%-35% across the indices.  Long-term, I think there are some things that will never be the same, so I don't know how that will affect long-term cash flows for businesses. 

But I'm being a bit optimistic!  Cheers! 

[Paarslaars]

I think it becomes important to distinguish between stocks that are affected in their business, and stocks that are getting dragged alongside with it in the panic.

 

We can't really predict if these tariffs are here to stay or not so better to assume they are. Which means Parsad is likely right, we are roughly half way, because we will still see drops in earnings projections, secondary markets hit, demand shrinking, jobs lost, etc... This will gradually drag the market down over the next quarters.

 

So far employment is fine and inflation slightly too high so the FED isn't going to do anything.

 

Consumer confidence should drop rapidly though.

Edited April 7, 2025 by Paarslaars

[Milu]

4 hours ago, tede02 said:

What's your read on the current downturn? Friday felt like people were throwing in the towel...sell now and ask questions later. Futures for Monday and global markets look to be continuing that mentality. The rhetoric from the administration only seems to be fanning more negative sentiment. 

 

I started this slide with a ton of cash. Finally started adding to some existing positions on Thursday and Friday, haven't bought anything new. I remember having a similar feeling in March of 2020...should I be more patient...or should I be deploying more aggressively? 

 

One issue is at the recent high in February, market multiples were rich. Even if the S&P dips into bear market territory tomorrow, it's not going to be cheap. Same issue for my individual holdings. Yeah they are down but nothing is close to the levels in March of 2020 or 08/09. 

 

Finally, it is interesting to observe the market rapidly pricing in the tariff impact. It's going to take weeks and months before the effects show up in any hard data. Maybe we're in a new era and growth rates and earnings through Q1 are completely meaningless as the economy resets to some degree? Then again, I wouldn't be surprise to see a 180 to some degree with the tariffs if public pressure builds enough. But at the moment it appears both the Fed and White House are prepared to take a lot more pain. 

 

IDK, just a lot of different thoughts. 

Once the activity in the ‘what did you buy’ thread starts to stop and the replies in the ‘what did you sell’ become ‘everything’ we will know we are getting close

 

In reality no one knows. Best bet is to buy stuff when I gets to a good value but also keep some funds in reserve to take advantage if this downturn becomes a ‘biggie’

[Paarslaars]

7 minutes ago, Milu said:

Once the activity in the ‘what did you buy’ thread starts to stop and the replies in the ‘what did you sell’ become ‘everything’ we will know we are getting close

 

In reality no one knows. Best bet is to buy stuff when I gets to a good value but also keep some funds in reserve to take advantage if this downturn becomes a ‘biggie’

I think when folks here start selling FHH and BRK to free up cash for cheaper stuff, that's when we bottom.

[Milu]

3 minutes ago, Paarslaars said:

I think when folks here start selling FHH and BRK to free up cash for cheaper stuff, that's when we bottom.

Hah very true. When many stocks on my watchlist like chipotle, lotus bakeries etc are still trading at 40+ multiples we could be still a while before things get fairly priced. We have currently gone from very expensive to overvalued. 

[Gamecock-YT]

At the point someone is making a post about it. The 'have we hit the top' thread was started August 2021. 

 

 

[Luke]

Brutal 4D Chess Day for my Portfolio.

[Luke]

I am wondering, for people who voted Trump and own a significant amount of assets in stocks? How do you guys feel having your net worth wracked? Is this what you voted for and wanted?

[Parsad]

1 hour ago, Luke said:

Brutal 4D Chess Day for my Portfolio.

 

Hang in there.  Don't make emotional decisions.  Use this period to learn more.  Cheers!

[Blake Hampton]

As an American, I’m terrified.

 

As an investor, I’m thrilled.

[UK]

4 hours ago, Parsad said:

Short-term, I think we're probably 40-50% of the way there before they start making concessions or deals...total drop of 30%-35% across the indices.  Long-term, I think there are some things that will never be the same, so I don't know how that will affect long-term cash flows for businesses. 

But I'm being a bit optimistic!  Cheers! 

 

SNP top ~6150*0,65=~4000. SNP F EPS ~250*16x=4000. Not out of this world to expect?

[Blake Hampton]

This is why you have to think long term. When everything was going great and the S&P was hitting new highs, I bet there were very few people thinking something like this might happen. The fact of the matter is that we’re trying to buy businesses that will produce for us during both good times as well as bad. This is why it’s important to buy into good businesses at good valuations. Both qualities are important. Worst case scenario, there won’t be another Great Depression in the way that previously occurred. Anything that happens in the future will almost certainly lean inflationary over time. This is the situation where you want to be an asset owner, and luckily for you, assets are currently on sale.

 

However, this rut can still get worse.

 

Edited April 7, 2025 by Blake Hampton

[Blake Hampton]

S&P imo is not a good barometer for gauging valuations. I have been harping on how expensive that thing is for quite some time, and I still think it has a long way to drop. That doesn’t mean there isn’t opportunity out there though.

[Parsad]

6 minutes ago, UK said:

 

SNP top ~6150*0,65=~4000. SNP F EPS ~250*16x=4000. Not out of this world to expect?

 

Yup, I think that's reasonable considering the risk free rate on the 10 year will probably come down to 3% in the next few months...putting upward pressure on that P/E multiple.  The longer it goes, the greater the S&P earnings drop.  If you assume a 10% drop in the earnings...give it a 16 times multiple and S&P hits 3200.  So it's probably in that range somewhere depending on when this shit stops.  Cheers!

[Paarslaars]

28 minutes ago, Parsad said:

 

Hang in there.  Don't make emotional decisions.  Use this period to learn more.  Cheers!

So not selling everything and putting it all into Bitcoin? Seems like long term this should be completely tariff independent.

[Parsad]

4 minutes ago, Blake Hampton said:

S&P imo is not a good barometer for gauging valuations. I have been harping on how expensive that thing is for quite some time, and I still think it has a long way to drop. That doesn’t mean there isn’t opportunity out there though.

 

S&P doesn't have to drop much further.  It could go sideways for several years as earnings build up again.  So, that's why it is hard to call a bottom and most investors should be fully invested before the actual bottom. 

 

You can always sell more expensive stocks to buy cheaper stocks and wind up the spring in your portfolio.  But if you wait too long and miss the bottom...well I think a lot of people missed the bottom of the Pandemic and on the gains.  Cheers!

[Parsad]

1 minute ago, Paarslaars said:

So not selling everything and putting it all into Bitcoin? Seems like long term this should be completely tariff independent.

 

Pretty much so.  The U.S. economy was actually perfectly fine before Trump fucked it up.  Unemployment was near historical lows, S&P earnings were growing, US GDP was growing, etc.  Sovereign debt and annual deficits were a concern, but I'm not sure Trump's strategy will solve that short-term either.  Cheers!

[mattee2264]

I think the near term selling will start to slow. 

 

Partly it reflects forced liquidations and weak hands as a lot of retail investors joined late in the party and are inexperienced. But also I think the market is throwing a tantrum and hoping that Trump will back down or Powell will push through an emergency rate cut. It is also a reflection that things will likely get a lot worse as the trade war escalates through retaliation until countries start to back down and try to negotiate a solution. A lot of market investors have been conditioned by previous bear markets where there was either a rescue (Fed pivot, government stimulus) or some exogenous event which restored confidence (e.g. Chat GPT release) or some data points that could help investors see light at the end of the tunnel (e.g. COVID case rates or CPI data). 

 

Problem this time is that we are already down 20% and likely good news (i.e. Trump and other countries eventually backing down) is likely to be months away and there is going to be a slew of bad economic and earnings data in the pipeline not least because a lot of countries front-ran tariffs and stocked up over the last few quarters and when a recession starts it can build its own momentum as layoffs and bankruptcies and defaults cause a chain reaction. 

 

I don't see how we avoid recession this time round. There is little dry powder as we're already running multi-trillion dollar deficits and these will worsen as automatic stabilizers kick in. The uncertainty alone is enough to cause layoffs and decreased corporate investment. Fed is taking a wait and see approach and in any case monetary policy operates with a lag when it comes to the real economy even if it can buoy stock markets. And there are negative wealth effects from stock market declines which exacerbate everything. And this isn't a recession that can be called off by reopening the economy like the COVID recession. 

 

So with no easy rescue I think markets probably will overshoot on the downside which takes SPY closer to 3000 then 4000 (which is probably around fair value). And that will play out (with the usual bear market rallies) over the next year or so. Then green shoots will start to emerge in the form of constructive trade talks, Trump claiming a win because interest rates are down and government debt has been refinanced and using that as an excuse to dilute tariffs massively, and Fed will also be forced to respond at some point because of their dual mandate.