Predictions on when the market correction happens

[rthomas]

When will the market correction occur?

I remember when Trump was elected President that there was a good bit of angst (myself included) about the stock market and Trumpian volatility that was likely to occur with everyones' retirement accounts. But, it didn't happen - and in fact the stock market kept on chugging upwards and its hard to even see a transition between Trump and Obama looking at the long term Dow trend (https://www.nytimes.com/2018/01/04/business/market-dow-2018.html)

So, the markets went up huge in 2017, and continue up as of today. I don't want to wade into the PPB aspects of why and who gets credit - the lack of transition between Obama and Trump administrations means that good things are and have been happening for the economy, globally as well as the U.S. What I am curious about is when the correction that fund managers are beginning to talk about will occur? Not trying to time the market exactly, but curious what will cause the correction when it occurs? Is there a bubble - it seems that stocks are increasing across all sectors.

Interested in DBR opinions.

[duke74]

My guys at Merrill wealth management think the rally still has legs based on fundamentals being reported by companies, even before any effects of the new tax bill. So, we are holding the course for now. But we are being wary - recognizing that while there is reality there are signs of that do look like a bubble.

Most write-ups I have seen are showing continued upward movement for he indices, with the forecasted amounts differing.

Thoughts from those here in the investment sector?

[PackMan97]

When will the market correction occur?

Sometime in the future :)

That's my most scientific answer I can give.

[duke74]

Sometime in the future :)

That's my most scientific answer I can give.

And remember, "buy low and sell high."

[duke79]

Sometime in the future :)

That's my most scientific answer I can give.

All joking aside, this response is probably the most accurate statement you can make about trying to time the ups and downs of the stock market!
There is the famous story about JP Morgan ... when someone asked him what he thought the stock market would do in the future. He thought about for a few seconds and he replied: "prices will fluctuate".

[CrazyNotCrazie]

Sometime in the future :)

That's my most scientific answer I can give.

That is the correct answer. Anyone who a) claims to know the answer with any specificity and b) is willing to share it with you without being compensated for that knowledge is full of it and should not be believed. There are definitely some economic and political indicators that could increase the probability of a correction, but certainly no guarantees.

[OldPhiKap]

The Dukes are trying to corner the frozen concentrated orange juice market. They must know something.

But, when Bitcoin and cyber currency is shown to be the Dutch Tulips that they must be, it'll all come crashing down.

[rasputin]

The Dukes are trying to corner the frozen concentrated orange juice market. They must know something.

But, when Bitcoin and cyber currency is shown to be the Dutch Tulips that they must be, it'll all come crashing down.

I'll bet you a dollar that you're wrong.

[rthomas]

Welp, the correction didn't happen today.

[JasonEvans]

March 11th.
http://s2.quickmeme.com/img/11/11e8da4a1107444f25b88524ee2aff1e7c3aa59a4072a64206 9b628e30892297.jpg

[fuse]

Does anyone have a decent capital preservation strategy that includes bonds with a decent return?

[Rich]

When will the market correction occur?

As soon as I buy I'll let you know. Just after is when the correction will occur.

[Bluedog]

Does anyone have a decent capital preservation strategy that includes bonds with a decent return?

CDs, my friend. It's probably the ONLY advantage individual investors have over institutional ones (because there's a cap of $250k on FDIC insurance). But yields by historical standards are still pretty poor, but are likely to continue increasing if the fed sticks to it's plan (right now, can get a 1yr no penalty CD around 1.75%). There are no low risk "decent return" options out there right now. But a balanced portfolio of CDs and equities is the best way to accomplish it.

[nmduke2001]

If anyone in my industry tells you they know when a correction is coming, they are giving you an educated guess at best. Timing the market is a losers game.

It’s important that investors set up an allocation that is appropriate for their risk tolerance. 2008 was a great litmus test. The S&P was down over 45% intra-year and finished down 37%FY. If you had a stock portfolio of $1mils on January 1, 2008 you were down to $630k by December 31. If you could handle that downward volatility then you are an aggressive investor and could be mostly invested in stocks if that’s your preference. Over the last decade you would have been rewarded nicely. If you can’t handle the downward volatility you should probably reduce your exposure to stocks. Lots of people are willing to call themselves aggressive investors in an up market but aren’t able to stomach the losses in a down market. Often investors will join a bull market too late, take on losses during the pullback, sell (locking in their losses), wait too long to get back in...rinse and repeat. This is a recipe for failure.

You should honestly understand your risk tolerance and create a portfolio that’s appropriate for that risk tolerance. Ultimately being invested properly will keep you invested which helps increase your returns long term.

If you’re in the distribution phase (ie retirement) it’s helpful to understand your withdrawal rate from your investments. If you withdrawal $40k a year from your investments, it might make sense to have 2 years of withdrawals in cash and cash alternatives. If you hit a market like that of 2008, you use this cash for your withdrawals so you aren’t selling into a bad market. When the market recovers (much quicker than most people think) you replenish your cash.

[fuse]

CDs, my friend. It's probably the ONLY advantage individual investors have over institutional ones (because there's a cap of $250k on FDIC insurance). But yields by historical standards are still pretty poor, but are likely to continue increasing if the fed sticks to it's plan (right now, can get a 1yr no penalty CD around 1.75%). There are no low risk "decent return" options out there right now. But a balanced portfolio of CDs and equities is the best way to accomplish it.

1.75% is pretty poor, not as bad as less than 2.5% for five years.

While I probably should, I’ve never done CD laddering.

I’m hoping someone out there has a bond that is making 3-5% that is stable and maybe even offers a decent dividend for a DRIP.

[RPS]

When will the market correction occur?

My answer from a couple of years ago is still good (be warned, it's not short).

Complexity, Chaos and Chance (https://rpseawright.wordpress.com/2016/05/17/complexity-chaos-and-chance/)

Key fact (quoting Nobel laureate Robert Shiller, from the first edition of his classic, Irrational Exuberance): “The U.S. stock market ups and downs over the past century have made virtually no sense ex post. It is curious how little known this simple fact is.”

Money quote: "Despite our best efforts to make it predicable and manageable, that world is too immensely complex, chaotic and chance-ridden for us to do so."

Answer to the IP question: I don't know (and neither does anybody else).

[Furniture]

I am very interested in this topic. Is it a bubble already? Don’t know. Part of me feels it could correct any moment but part of me thinks that now with the tax cut companies are going to make even more money.
i have never reallocated my investments in the past I have always stuck with the market and have been rewarded. Problem is that I feel I have a nice tidy sum in my 410K and why not consider selling now or soon (if it really is high) and then going in again after a correction.

[duke74]

I am very interested in this topic. Is it a bubble already? Don’t know. Part of me feels it could correct any moment but part of me thinks that now with the tax cut companies are going to make even more money.
i have never reallocated my investments in the past I have always stuck with the market and have been rewarded. Problem is that I feel I have a nice tidy sum in my 410K and why not consider selling now or soon (if it really is high) and then going in again after a correction.

Remember that your allocation (ie equities vs fixed income) may be very different now from your target as equities have soared. So, while your target last year might have been 60/40, unless you have reallocated you might now be at 70/30. If that’s ok with you then alright...but worth that assessment.

I actually crystallized significant unrealized gains earlier this year, but then reinvested albeit in a different, more balanced, strategy.

[fuse]

This makes me think there could be hope for a DBR investors thread.

[RPS]

why not consider selling now or soon (if it really is high) and then going in again after a correction.Legendary money manager Peter Lynch: "Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves."

[OldPhiKap]

Remember that your allocation (ie equities vs fixed income) may be very different now from your target as equities have soared. So, while your target last year might have been 60/40, unless you have reallocated you might now be at 70/30. If that’s ok with you then alright...but worth that assessment.

I actually crystallized significant unrealized gains earlier this year, but then reinvested albeit in a different, more balanced, strategy.

The old allocation rule of thumb (for what little generic advice is worth) was that your stock holding % should be 110 minus your age. As you get older, less risk and more bonds/CDs. Not sure if that is still used, or has been modified.

We have had an incredible run. I don’t see much harm in locking in some profits. You may miss some upside, but you may protect against a big bubble burst too. But I’m closer to the end of my working career than the beginning.

[Dr. Rosenrosen]

I won’t link it here b/c it’s NSFW... but Wu-Tang gives sound financial advice. Google it.

[acdevil]

You got to diversify your bonds, @&#%!

[ricks68]

Does anyone have a decent capital preservation strategy that includes bonds with a decent return?

Texas municipal 30 yr bonds paying 4% and will rise as the Fed increases the rate.

ricks

[budwom]

People who claim to know when the correction is going to happen (if it happens) can't be believed...but we are certainly at a key point now
where fourth quarter earnings will be reported...and much of the stock market's rise has a baked in assumption that earnings will continue to grow (aided by the tax law change).

IF (emphasis) earnings widely disappoint, it would a perfect time for something of a correction, but I don't have the slightest idea if earnings will be disappointing or not.

[fuse]

Here is one person’s perspective on a date.
I’m not knowledgeable enough to comprehend if this is a legit concern, or FUD.

https://pro.manwardpress.com/p/EVENTTO49MWLLTMTDMTDLT/WMWLU105/?h=true

[RPS]

Here is one person’s perspective on a date.
I’m not knowledgeable enough to comprehend if this is a legit concern, or FUD.

https://pro.manwardpress.com/p/EVENTTO49MWLLTMTDMTDLT/WMWLU105/?h=trueThe previous date was December 13 (https://www.mailcharts.com/iframe/4138670d-e787-825b-24cc-bb85fb45093c). Or December 15, 2016 (https://ignoble-experiment.blogspot.com/2016/12/will-your-phone-die-on-monday.html). I'm sure there were others, mostly scrubbed.

[Jeffrey]

Don't try to time the market.

[YmoBeThere]

Don't try to time the market.

But it is going to happen today!!!

Or tomorrow...or some other day.

Eventually, right?

[PackMan97]

But it is going to happen today!!!

Or tomorrow...or some other day.

Eventually, right?

I predict that it will happen on a day that ends in Y.

[Jeffrey]

But it is going to happen today!!!

Or tomorrow...or some other day.

Eventually, right?

Hopefully, many times before my death!

[OldPhiKap]

Interesting opinion piece in the WSJ today by Marin Feldstein. Thesis: Fed is behind in raising interest rates, and with inflation looming will start moving them up. This will drive stock P/E back to historic ranges and drive the price down.

[Rich]

Interesting opinion piece in the WSJ today by Martin Feldstein. Thesis: Fed is behind in raising interest rates, and with inflation looming will start moving them up. This will drive stock P/E back to historic ranges and drive the price down.

He went my high school (many years before I did). My Social Studies teacher, Mr. Geiss, used to tell us how wonderful Marty was. True story.

[OldPhiKap]

He went my high school (many years before I did). My Social Studies teacher, Mr. Geiss, used to tell us how wonderful Marty was. True story.

When the teachers at my high school talked about former students, it was usually to lament that they knew the kid would end up in jail one day.

Did Mr. Geiss say how Marty was at predicting future events from extrapolated facts? Asking, y’know, for a friend and all.


(That’s pretty cool, Rich.)

[RPS]

Did Mr. Geiss say how Marty was at predicting future events from extrapolated facts? Asking, y’know, for a friend and all.Bill Bernstein (https://en.wikipedia.org/wiki/William_J._Bernstein) did: "There are two kinds of investors. There are two kinds of investors, be they large or small: those who don't know where the market is headed, and those who don't know that they don't know."

[OldPhiKap]

Bill Bernstein (https://en.wikipedia.org/wiki/William_J._Bernstein) did: "There are two kinds of investors. There are two kinds of investors, be they large or small: those who don't know where the market is headed, and those who don't know that they don't know."

True. But wouldn't it seem logical to assess:

1. The Fed is going to be raising interest rates after a very easy money policy for close to a decade now and the decreased concerns about deflation that wafted every so often a few years ago?

2. Rising interest rates increase the attractiveness of an increased amount of investing dollars going towards bonds as opposed to equities?

3. Rising interest rates increase the cost of capital, having a dampering effect on corporate earnings and value?

4. Rising interest rates tend to adversely impact small and mid-cap stocks more than large, and certain industries over others?

5. Many overseas markets such as Europe have already done the majority of their tightening for the foreseeable future, and therefore certain foreign stocks may be better-priced?

I'm not saying that any of that calls for a crash. I question whether that means that the current P/E priced into the U.S. market is likely to sustain. It has nothing to do with timing the market, it has to do with asset allocation and whether my investment allocation for new dollars may be better served overseas or in the industries/sectors/cap sizes that are less interest-rate dependent.

I dunno. That's why I read and why I enjoy threads like this. Kudos to all for their input.

[Jeffrey]

When the teachers at my high school talked about former students, it was usually to lament that they knew the kid would end up in jail one day.



Was it because I had long hair, wore Grateful Dead t-shirts, slept in class, and was always bored?

[Jeffrey]

Interesting opinion piece in the WSJ today by Marin Feldstein. Thesis: Fed is behind in raising interest rates, and with inflation looming will start moving them up. This will drive stock P/E back to historic ranges and drive the price down.

I have not read the article, but it's probably simply based upon the probability the discount rate, in discounted cash flow analysis, will increase (maybe, substantially). I'd wager the discount rate is heading north within the next 12 months.

[Jeffrey]

Many overseas markets such as Europe have already done the majority of their tightening for the foreseeable future, and therefore certain foreign stocks may be better-priced?


Why do you say that? Isn't the current US 10 year rate substantially higher?

[Rich]

Did Mr. Geiss say how Marty was at predicting future events from extrapolated facts? Asking, y’know, for a friend and all.


Reminds me of the old joke I heard as an Economics major:

A ‪‎physicist‬, an ‪‎engineer‬ and an ‪‎economist‬ are stranded in the desert. They are hungry and find a can of corn. They want to open it, but how?
The physicist says: “Let’s start a fire and place the can inside the flames. It will explode and then we will all be able to eat”.
“Are you crazy?” says the engineer. “All the corn will burn and scatter, and we’ll have nothing. We should use a metal wire, attach it to a base, push it and crack the can open.”
“Both of you are wrong!” states the economist. “Where the hell do we find a metal wire in the desert?! The solution is simple: Assume we have a can opener…”

[Jeffrey]

Reminds me of the old joke I heard as an Economics major:

A ‪‎physicist‬, an ‪‎engineer‬ and an ‪‎economist‬ are stranded in the desert. They are hungry and find a can of corn. They want to open it, but how?
The physicist says: “Let’s start a fire and place the can inside the flames. It will explode and then we will all be able to eat”.
“Are you crazy?” says the engineer. “All the corn will burn and scatter, and we’ll have nothing. We should use a metal wire, attach it to a base, push it and crack the can open.”
“Both of you are wrong!” states the economist. “Where the hell do we find a metal wire in the desert?! The solution is simple: Assume we have a can opener…”

The good news is the desert coyote enjoyed the corn.

[camion]

Reminds me of the old joke I heard as an Economics major:

A ‪‎physicist‬, an ‪‎engineer‬ and an ‪‎economist‬ are stranded in the desert. They are hungry and find a can of corn. They want to open it, but how?
The physicist says: “Let’s start a fire and place the can inside the flames. It will explode and then we will all be able to eat”.
“Are you crazy?” says the engineer. “All the corn will burn and scatter, and we’ll have nothing. We should use a metal wire, attach it to a base, push it and crack the can open.”
“Both of you are wrong!” states the economist. “Where the hell do we find a metal wire in the desert?! The solution is simple: Assume we have a can opener…”

You just just reminded me of a book I, uh, borrowed from the EES department at FU a decade or so ago. :)

8008

[snowdenscold]

You just just reminded me of a book I, uh, borrowed from the EES department at FU a decade or so ago. :)

8008

I heard the spherical cow lives at the same farm as the point-mass horse.

[rthomas]

Today!

[Jeffrey]

Today!

Today are you predicting a down day on Monday, Feb. 5?

[duketaylor]

Today's decline was/has been way overdue. No market continues a climb without a small sell-off. Corrections will happen; we've witnessed an obscene gain since the pres election. This was overdue. Could continue some, but there's no negative economic news to warrant a continued decline. Just my .02.

[rthomas]

Today are you predicting a down day on Monday, Feb. 5?

Complex algorithm that depends on the Super Bowl winner, whether Ricky Fowler wins the Phoenix Open, and how Duke plays today in the Garden.

[OldPhiKap]

Complex algorithm that depends on the Super Bowl winner, whether Ricky Fowler wins the Phoenix Open, and how Duke plays today in the Garden.

I blame the damn groundhog. Six more weeks of winter?!? Sell, Mortimer, sell!

[dudog84]

Complex algorithm that depends on the Super Bowl winner, whether Ricky Fowler wins the Phoenix Open, and how Duke plays today in the Garden.

Are you trying to cause a panic?

[YmoBeThere]

Are you trying to cause a panic?

I’ve got all my sell orders entered already!

[Jeffrey]

I’ve got all my sell orders entered already!

I did the opposite, I bought Nike. There will be many pairs of ragged out Nikes, needing replacement, by Wednesday afternoon.

[Tripping William]

Complex algorithm that depends on the Super Bowl winner, whether Ricky Fowler wins the Phoenix Open, and how Duke plays today in the Garden.

So, I'm guessing the first part of this algorithm was Pats-friendly?

[fuse]

It’s been a brutal couple of days.

[YmoBeThere]

I did the opposite, I bought Nike. There will be many pairs of ragged out Nikes, needing replacement, by Wednesday afternoon.

I didn't sell a thing...actually was a buyer at about 3:15 when my limits were hit. Small bites...

[Tappan Zee Devil]

You just just reminded me of a book I, uh, borrowed from the EES department at FU a decade or so ago. :)

8008

I have actually used that book as a secondary text/source of problems. It is useful in breaking an apparently intractable problem into pieces that you can approximate.

[Jeffrey]

I didn't sell a thing...actually was a buyer at about 3:15 when my limits were hit. Small bites...

I'm not surprised. The best players shine at crunch time.

[throatybeard]

I predict this week 😂😂😂

[Jeffrey]

I predict this week 😂😂😂

A hard rain's a gonna fall?

[DevilFalcon]

Stock market? That's so yesterday. Crypto is where everything is headed.