Market Outlook

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rockthisworld
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Market Outlook

Post by rockthisworld » Sun Sep 08, 2019 2:50 am

https://www.marketwatch.com/story/inves ... CM2U8af4Rg

So apparently this guy predicted 2000 and 2008 bear markets. He is saying the next 20 years will probably deliever low returns of around 2-3% real. I have been using 4.5% nominal with 3.3% inflation which nets a 1.2% real. Do you guys look positively during bear markets and think of it as opportunity to purchase at a bargain rate? I have been investing since 2017 and can so far easily handle a 10% correction. Is it fair to say that the market will drop due to high p/e levels? Would we ever see a market that has been stagnant for long term (20+years like Japan)? I think that would make me more nervous than seeing real returns float at 2%.

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Forester
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Re: Market Outlook

Post by Forester » Sun Sep 08, 2019 3:55 am

rockthisworld wrote:
Sun Sep 08, 2019 2:50 am
https://www.marketwatch.com/story/inves ... CM2U8af4Rg

So apparently this guy predicted 2000 and 2008 bear markets. He is saying the next 20 years will probably deliever low returns of around 2-3% real. I have been using 4.5% nominal with 3.3% inflation which nets a 1.2% real. Do you guys look positively during bear markets and think of it as opportunity to purchase at a bargain rate? I have been investing since 2017 and can so far easily handle a 10% correction. Is it fair to say that the market will drop due to high p/e levels? Would we ever see a market that has been stagnant for long term (20+years like Japan)? I think that would make me more nervous than seeing real returns float at 2%.
This gentleman is known as a market "bear". He may be correct over the next decade. Jan 1999 to Jan 2019 the S&P 500 compounded at 5.90%, from a higher base than today. Call that 3.75% real; perhaps he is being pessimistic on his 20 year call?

And of course there's more to the world than the USA, most ex-US markets are now historically cheap.

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dogagility
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Re: Market Outlook

Post by dogagility » Sun Sep 08, 2019 5:27 am

rockthisworld wrote:
Sun Sep 08, 2019 2:50 am
Do you guys look positively during bear markets and think of it as opportunity to purchase at a bargain rate?
It's always a good time to invest, and I remain fully invested at all times. I lump sum each paycheck into my chosen asset allocation. Then, rebalance as needed based upon market fluctuations.
rockthisworld wrote:
Sun Sep 08, 2019 2:50 am
I have been investing since 2017 and can so far easily handle a 10% correction.
And I assume the 20% decline of last December.
rockthisworld wrote:
Sun Sep 08, 2019 2:50 am
Is it fair to say that the market will drop due to high p/e levels?
Some people would suggest this. I think of this a part of the investment community's "noise", akin to the article you referenced in your post, and pay no attention to it.
rockthisworld wrote:
Sun Sep 08, 2019 2:50 am
Would we ever see a market that has been stagnant for long term (20+years like Japan)? I think that would make me more nervous than seeing real returns float at 2%.
If investing in a diversified world market, I find this highly unlikely based upon human nature and past history. People often bring up Japan, Russia, Roman Empire, etc when discussing investment doom and gloom. Diversify your investments and stay the course.
"The stock market is a device for transferring money from the impatient to the patient" -- Warren Buffett

columbia
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Re: Market Outlook

Post by columbia » Sun Sep 08, 2019 5:44 am

While he might be correct:

1. He has a financial incentive to convince people that they shouldn’t rely on a low cost total market fund.

2. As with every market prediction based on valuations, it ignores the possibility of a market crash and significantly lower costs for buying equities. How likely do people think it is that we’ll go another 10 years without a crash?
If you leave your head in the sand for too long, you might get run over by a Jeep.

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rockthisworld
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Re: Market Outlook

Post by rockthisworld » Sun Sep 08, 2019 8:20 am

Yeah everyone can make a prediction. I go conservative with 4.5% nominal in hopes that the market would easily beat that over 40-45 years and I dont have to worry about numbers and can live within a budget and donate anything extra.

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JoMoney
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Re: Market Outlook

Post by JoMoney » Sun Sep 08, 2019 8:46 am

It's hard for me to imagine that the market would just "drop" because of high P/E levels.
As far as I can tell, the broad market price levels don't seem influenced by some irrational exuberance in business earnings expectations, but more of a reflection of the very low expectations on things like 30yr U.S. Treasury Bond yielding 2%, a 10yr Note yields 1.6%
You would have to go back to the 1950's to find another era where the S&P 500 was yielding more than treasuries.
By that framing, stocks are cheap...
I have no idea what treasuries will be yielding 10 years from now (and it would make a difference if I did), but I fully expect stocks to be earning more and paying higher dividends then they are today.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

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rockthisworld
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Re: Market Outlook

Post by rockthisworld » Sun Sep 08, 2019 9:13 am

Haha I really hope your predictions are right.

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CyclingDuo
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Re: Market Outlook

Post by CyclingDuo » Sun Sep 08, 2019 9:16 am

rockthisworld wrote:
Sun Sep 08, 2019 2:50 am
https://www.marketwatch.com/story/inves ... CM2U8af4Rg

So apparently this guy predicted 2000 and 2008 bear markets. He is saying the next 20 years will probably deliever low returns of around 2-3% real. I have been using 4.5% nominal with 3.3% inflation which nets a 1.2% real. Do you guys look positively during bear markets and think of it as opportunity to purchase at a bargain rate? I have been investing since 2017 and can so far easily handle a 10% correction. Is it fair to say that the market will drop due to high p/e levels? Would we ever see a market that has been stagnant for long term (20+years like Japan)? I think that would make me more nervous than seeing real returns float at 2%.
Nobody knows. All you can control and focus on is that you save at least 15% (we would advocate saving more than 15%) week in and week out, from your human capital to build your wealth over the next 4 decades.

If you have not read Bill Bernstein's easily accessible primer, then do so.

Here it is:

https://www.etf.com/docs/IfYouCan.pdf

Dive in and read as much as you can in the Wiki here at the Bogleheads.

https://www.bogleheads.org/wiki/Getting_started

How did you feel during the 20% drop from September to Christmas Eve last year?

Those of us who have invested and lived through the 2000, 2008 (as well as prior bear markets) can attest to the benefit and value of sticking with your plan and investing a portion of your income (at least 15%) every paycheck through thick and thin. That's what you should be focusing on - leveraging your human capital to boost your savings through the entire business cycle. Spending too much time being Chicken Little and worrying about the sky falling is not going to build your wealth over the coming decades.

Focus on what you can control. Your income and savings rate. Increase both of those and you will be well on your way to taking off your Chicken Little costume...

:sharebeer
"Everywhere is within walking distance if you have the time." ~ Steven Wright

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rockthisworld
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Re: Market Outlook

Post by rockthisworld » Sun Sep 08, 2019 9:28 am

As of right now I save $420 each paycheck and invest it. I plan on doing that until I start a family one day when I may have to cut back big time (would go to 30 hours at work) and dedicate the rest of my time for my family. I live decently frugally. But a 20% drop wasnt too bad because I invest every paycheck. 2008 may scare me but knowing that you have to ride the wave and knowing I want to work til atleast 70 I feel better about it. Also by spring of 2020 I want to go carless and increase my savings to $500 a paycheck plus better for the enviorment, my health, and my wallet haha.

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CyclingDuo
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Re: Market Outlook

Post by CyclingDuo » Sun Sep 08, 2019 9:32 am

rockthisworld wrote:
Sun Sep 08, 2019 9:28 am
As of right now I save $420 each paycheck and invest it. I plan on doing that until I start a family one day when I may have to cut back big time (would go to 30 hours at work) and dedicate the rest of my time for my family. I live decently frugally. But a 20% drop wasnt too bad because I invest every paycheck. 2008 may scare me but knowing that you have to ride the wave and knowing I want to work til atleast 70 I feel better about it. Also by spring of 2020 I want to go carless and increase my savings to $500 a paycheck plus better for the enviorment, my health, and my wallet haha.
Sounds like you are not yet married. In looking for a partner, absolutely consider a dual income household as a must. I'm not sure cutting back to part-time to dedicate time to your family is a wise financial decision when that time comes.

Nothing wrong with keeping the big three costs down (housing/transportation/food). What about increasing your income now while you are young and single?
"Everywhere is within walking distance if you have the time." ~ Steven Wright

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patrick013
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Re: Market Outlook

Post by patrick013 » Sun Sep 08, 2019 6:25 pm

Those fancy mathemeticians...I look at most of them as being extraneous.

The lowest long term quantile that has a usuable low mean return rate is between 5-6% return for equal groups of 8 year quantiles which is higher than GNP growth presently. Inflation projected at 1.7%. So will the market portfolios' EPS numbers rise or fall a few per cent with PE's holding steady ?

Remember the Dow Theory ? Hasn't had strong correlations for decades but certain railroads are predicting a 5% drop in total shipments and a 10% drop in intermodal (import and export) shipments.

So if earnings slow there's a story about that.
age in bonds, buy-and-hold, 10 year business cycle

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firebirdparts
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Re: Market Outlook

Post by firebirdparts » Sun Sep 08, 2019 6:49 pm

columbia wrote:
Sun Sep 08, 2019 5:44 am

2. As with every market prediction based on valuations, it ignores the possibility of a market crash and significantly lower costs for buying equities. How likely do people think it is that we’ll go another 10 years without a crash?
Surely that's not what anybody means. If you predicted a decade of zero total returns in 1999, you'd have been right on the money. It's not weird. And that was nominal returns. The weird part would be people thinking you meant stock prices would be frozen for a decade.
A fool and your money are soon partners

sharx
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Re: Market Outlook

Post by sharx » Mon Sep 09, 2019 8:39 pm

Interesting that his prediction of reduced growth seems based in part on wage stagnation over the past half century leading to great wealth/income inequality. Those statistics are indeed a lot different now and a lot of Boglehead philosophy is based on and backtested on that same time period.

I don't think any of this is actionable though aside from saving more aggressively and spending less, keep your AA and stay the course.

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rockthisworld
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Re: Market Outlook

Post by rockthisworld » Sun Nov 17, 2019 6:38 am

dogagility wrote:
Sun Sep 08, 2019 5:27 am
rockthisworld wrote:
Sun Sep 08, 2019 2:50 am
Do you guys look positively during bear markets and think of it as opportunity to purchase at a bargain rate?
It's always a good time to invest, and I remain fully invested at all times. I lump sum each paycheck into my chosen asset allocation. Then, rebalance as needed based upon market fluctuations.
rockthisworld wrote:
Sun Sep 08, 2019 2:50 am
I have been investing since 2017 and can so far easily handle a 10% correction.
And I assume the 20% decline of last December.
rockthisworld wrote:
Sun Sep 08, 2019 2:50 am
Is it fair to say that the market will drop due to high p/e levels?
Some people would suggest this. I think of this a part of the investment community's "noise", akin to the article you referenced in your post, and pay no attention to it.
rockthisworld wrote:
Sun Sep 08, 2019 2:50 am
Would we ever see a market that has been stagnant for long term (20+years like Japan)? I think that would make me more nervous than seeing real returns float at 2%.
If investing in a diversified world market, I find this highly unlikely based upon human nature and past history. People often bring up Japan, Russia, Roman Empire, etc when discussing investment doom and gloom. Diversify your investments and stay the course.
Sorry for the late response but this definitely helped calm my nerves alittle and ride the wave. I still have 40 years of investing ahead of me.

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fortyofforty
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Re: Market Outlook

Post by fortyofforty » Sun Nov 17, 2019 7:29 am

rockthisworld wrote:
Sun Sep 08, 2019 2:50 am
https://www.marketwatch.com/story/inves ... CM2U8af4Rg

So apparently this guy predicted 2000 and 2008 bear markets. He is saying the next 20 years will probably deliever low returns of around 2-3% real. I have been using 4.5% nominal with 3.3% inflation which nets a 1.2% real. Do you guys look positively during bear markets and think of it as opportunity to purchase at a bargain rate? I have been investing since 2017 and can so far easily handle a 10% correction. Is it fair to say that the market will drop due to high p/e levels? Would we ever see a market that has been stagnant for long term (20+years like Japan)? I think that would make me more nervous than seeing real returns float at 2%.
Try your best to ignore the noise. As you increase your assets, losses will become more painful to bear. Trust me, there is a big difference between seeing your portfolio down a couple of hundred or thousand dollars, and watching it drop six figures.

There will be blood in the streets of Wall Street, figuratively. There always is. And there are always those who predict the next bear market. There always are. Tune them out. Just keep investing, no matter what. Be grateful for market slides, as you will indeed buy more equities for the same dollars.

Don't take this the wrong way, but, having been investing only since 2017, you ain't seen nothin' yet. :sharebeer
Indexing works, not because of magic, but because of math. | Diligentia. Vis. Celeritas. - Jeff Cooper | Out of self-quarantine.

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rockthisworld
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Re: Market Outlook

Post by rockthisworld » Sun Nov 17, 2019 8:24 am

I believe it. I mean with a favorable extended bull run. I just want the bear to come already. Just so I can keep buying at cheaper prices. But every two weeks like clockwork whether stocks are up or down or sideways lol.

SovereignInvestor
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Re: Market Outlook

Post by SovereignInvestor » Sun Nov 17, 2019 8:36 am

This secular bull market is about 6 years old with new highs in 2013. The last secular bull lasted 18 years from 1982 new highs to 2000. The previous one lasted about 20 or so years from early 1950s new highs to 1973 peak.

Calling for a bear market is a dangerous game. Any perma bear also would have technically called the 2000 and 2008 crashes but those are rare.

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CyclingDuo
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Re: Market Outlook

Post by CyclingDuo » Sun Nov 17, 2019 8:51 am

rockthisworld wrote:
Sun Nov 17, 2019 8:24 am
I believe it. I mean with a favorable extended bull run. I just want the bear to come already. Just so I can keep buying at cheaper prices.
You had your moment throughout Q4 2018, and throughout Q1 2019: https://www.yardeni.com/pub/stmktbullbearmkt.pdf

That's why I asked you upthread: How did you feel during the 20% drop from September to Christmas Eve last year?

We haven't had that type of buying opportunity since 2015-16, and prior to that 2011. When they come along, and they do come along every few years, it is your opportunity to buy at cheaper prices. The recency bias of the two larger bear markets in the 2000-2009 time frame will color a lot of people's decisions for their remaining days, but life goes on and not every bear market is "the big one" like those two were.

Going forward, things have firmed up quite well since Q4 2018 with lots of professional market watchers liking the set up they see. Of course, "nobody knows nothing" - so just invest month in and month out through it all as your investing horizon involves decades.

Here are a few examples...

https://joefahmy.com/2019/11/09/weekend ... ng-started

https://finance.yahoo.com/news/dow-3000 ... 22790.html

https://www.marketwatch.com/story/the-s ... 2019-10-29

https://www.youtube.com/watch?v=F9Dd6TK ... e=youtu.be
"Everywhere is within walking distance if you have the time." ~ Steven Wright

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Johnnie
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Re: Market Outlook

Post by Johnnie » Sun Nov 17, 2019 10:18 am

I'm looking at a 25 year retirement, max, probably not much more than 20 years. I want to leave something for the family but don't need to change lives with it.

25 years is not a long time in terms of market cycles. Not long enough to be sure of recovery from a big early downdraft.

And so, there is a room in the back of my mind where expected returns are zero and retirement distributions are estimated with that assumption. The inhabitant of that room still manages to worry inflation could somehow coexist in that universe and wreak serious havoc.

Actually, a couple years before retirement my planning is more or less based on that first assumption - zero. That means having a conservative 4% percent-of-the-portfolio initial distribution rate, kicking up to 5% at 70 (and play it by ear after that, plus Taylor's "a little more in good years a little less in bad").

IOW, hope for the best be prepared for - not absolutely the worst, but far less than optimal.


PS. SS and a small rump of a state pension will cover all my core expenses after 70 - I guess that's pretty optimal in one important regard.
"I know nothing."

garlandwhizzer
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Re: Market Outlook

Post by garlandwhizzer » Sun Nov 17, 2019 2:10 pm

The search for a market guru who can reliably predict the market's future over any significant time period is fruitless. No one does that reliably and dependably either now or in the past. Grantham along with many others (Bogle, Swedroe, Bernstein, Arnott, etc.,) expect lower US equity returns and near zero inflation adjusted bond returns going forward instead of happy story of the long term historical past. Their projections are just guesses with a wide range of expected outcomes on either side, a much narrower range with bonds however than with stocks. It is not wise IMO to expect the robust bond returns of the last 4 decades going forward. How stocks will do going forward is open to question but likely not as well as in the past. Grantham has been consistently dead wrong, too bearish, about the current equity bull market which is now more than 10 years old and still running. It is in fact this pessimism that keeps the bull going by preventing the bubble valuations of 1999 when there was no such pessimism. The only real use of all these rather grim projections going forward is not to expect historical returns in your investment planning. Given the current situation some may want to consider increasing equity exposure up to their maximal risk tolerance levels, investing in what has suffered most in recent years like INTL, EM, VAL, etc., which as a result seem relatively cheap at present relative to their historical norms, and/or the old reliable working longer and spending less, all of which may not be what we want to hear.

The good news is that there is currently a massive glut of wealth worldwide and it is heavily concentrated in the investing class. They have to invest huge amounts of money somewhere so they continue to buy quality bonds that yield less than inflation and equity that sells at generous but not bubble-like prices. Backtesting totally misses this basic imbalance of quality investing asset supply and demand for it, so it may not a good guide to the future. In this background valuations of all quality assets may continue to rise and may never return to historical norms. Or if another black swan hits, they may. As Yogi Berra is supposed to have said, "The hard thing about predicting is the future."

Garland Whizzer

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