Stock Indexes Drop As Bond Market Flashes Recession Warning

Discussion in 'Current Events' started by cd8ed, Mar 23, 2019.

  1. cd8ed

    cd8ed Well-Known Member Past Donor

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    The stock market tumbled Friday as investors digested an ominous warning sign: Interest rates on long-term government debt fell below the rate on short-term bills. That's often a signal that a recession is on the horizon.

    The Dow Jones Industrial Average fell more than 460 points Friday, or about 1.8 percent. The broader S&P 500 index fell 1.9 percent. NPR



    Bond yields around the world tumbled after a raft of disappointing purchasing-managers-index readings for the eurozone affirmed fears of lackluster growth in the 19-member group already contending with a trade slowdown and Brexit uncertainty. This comes after the Federal Reserve cut back on its interest-rate projections from two to none this week, with Fed Chairman Jerome Powell citing global economic headwinds for the cautious stance. Yields tend to retreat when growth prospects sour, and inflation fears have waned.

    U.S. stocks, meanwhile, accelerated losses as the yield curve inverted. Market Watch




    Stocks have been rocky but an inverted yield has been a major predictor of recession in the last cycles. Looking at our current administration who has relied largely on trend lines set during the last recovery, how will trump preform if the economic cards he holds suddenly shift against him? Do any of the Democratic candidates have the credentials to handle another recession?

    Personally I would rather have four more years of trump than have a recession occour on his watch that he is ill prepared to handle. Selling a few select underperforming stocks today as a precaution — especially that mess that is Boeing.
     
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  2. Capn Awesome

    Capn Awesome Well-Known Member

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    Mine took a beating. But I'm mostly invested in stuff I believe in for the long term. Solar power, marijuana, bio tech. Recession or no, people will still want weed.
     
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  3. cd8ed

    cd8ed Well-Known Member Past Donor

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    Yeh I think MJ will do great, growth potential is enormous what stocks do you recommend in that area? My solar stocks didn’t do well due to the tariffs. Got out after they were announced but will go back in once trump changes course or is out of office.
     
  4. Capn Awesome

    Capn Awesome Well-Known Member

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    I'm invested mostly in a Canadian company called aurora cannabis. There is a billionaire who is onboard too and they are the only international distributer in the world right now. When he invested I made a ton. I expect Federal marijuana laws in the US to relax in the coming years and pave way for imported weed and maybe the EU too. Growth has just started (pun intended) I might put a little more into Canopy Growth as well, just for more diversity.

    I expect the tariffs to lighten up eventually. I'm still ahead slightly on solar stocks. I have a number of them. Solar is the future, unless some other tech comes up. I use them myself and love them. They will reach a tipping point soon I predict where they will ne so efficient that everyone will get them.

    My biotech stocks (mostly crisper) have lost me money, but I dont have much in them and if gene editing pans out it could be huge.

    Edit: ironic thing is I stopped smoking weed myself recently.
     
    Last edited: Mar 23, 2019
  5. doombug

    doombug Well-Known Member

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    Buy! Buy! Buy!

    Dips in the market are buying opportunities.
     
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  6. Market Junkie

    Market Junkie Banned

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    ^^^ Sure, doomer is another clueless right-winger, but I would tend to agree with his opinion here.

    Now, granted, we have a reckless republican maniac in the White House, and an assortment of incompetent right-wing sycophants surrounding him (what can possibly go wrong economically, eh) … BUT … I still think it's premature for investors to be in full-blown panic mode at this point.

    This yield curve inversion MAY not be as powerful a recession predictor as in the past. But even if it is accurately signaling future (republican) recession, chances are this recession won't actually start till sometime next year.

    After the very strong start for equities this year, wouldn't be at all surprised to see more profit-taking next week (final week of the quarter).

    But … April tends to be a VERY strong month for stocks in pre-presidential-election years like this one … and I still think the odds favor good full-year performance for the major indices.

    Now next year … given all the uncertainty that election years typically bring … all bets are OFF...
     
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  7. 61falcon

    61falcon Well-Known Member

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    The Market and most stocks are grossly over valued right now due to extensive company share buy backs, both with repatriated overseas money and excessive corporate borrowing, to inflate stock prices.
     
  8. Quantum Nerd

    Quantum Nerd Well-Known Member

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    Absolutely.

    The bond yield curve has been pretty flat for quite some time.

    The prudent thing for investors to do is: Absolutely nothing. Stay the course, and DCA into a mix of stocks and bonds as usual.

    Nobody knows nothing as to what the stock market will do tomorrow, next week, in a month, or a year. Especially don't listen to doombug.
     
    Last edited: Mar 23, 2019
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  9. Market Junkie

    Market Junkie Banned

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    You seem to have the temperament and self-control to be a successful investor over the long haul, Nerd. :thumbsup:

    DCA is clearly a fine strategy that's recommended for most investors.

    Did it myself for many years.

    But, at this point, I normally invest big hunks of dough only when there's BLOOD flowing thru those "canyons" on Broad and Wall.

    My last big (and lucky) purchase was December 26th … just a day after that brutal Christmas Eve bottom.

    Opened a position in another Vanguard index fund (VDADX) that I'd been looking to add to the portfolio.


    At any rate, strong start to Q2 for U.S. equities, as expected

    I believe the S&P 500 was up around 2% this week. :thumbsup:

    Wouldn't be surprised to see the 500 set a new all-time record high in the next few weeks before some of the usual "sell in May" profit-taking commences.


    Now, should we see another SPECTACULAR trump-gop FAILURE (like the one we saw at that trump-kim summit in Vietnam back in February) with these China trade negotiations, then all bets are OFF...
     

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