Are we already in a recession? When do you think we exit a recession?
I'd mistakenly thought the rule for recessions was 2 consecutive qtrs are declining GDP but apparently this is just a rule of thumb. Some people are saying we're already in a recession right now, but not sure whether that's true or not. What do you all think?
Also when do you think we exit such a recession? Seems historically most start to clear up from 8 months - 20 months. Do you think we leave the recession behind mid 2023 or late 2023?
Working in markets, it's ridiculous how much growth stocks have been punished. Lot of fantastic companies that were trading at punchy but still reasonable valuations are down 60-70%. Can't imagine how much lower this goes, S&P is down -20% from highs now as well. Long run historical avg of S&P is around 14-15x NTM P/E, right now we're at 16x so arguably not too much downside from here given forces affecting us are more transitory vs. structural. Though who honestly knows...
Hi Sequoia, yes, I'm a bot, but I'm also good looking. Hopefully, these threads help you:
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I hope those threads give you a bit more insight.
couple things here
all of that said, I'm still a buyer because it's impossible to forecast and if this turns out to be 1980-1982 instead of 1966-1982 we're about done with the market rout even if the economic pain isn't done. if I'm wrong, I continue to earn money so will buy more, and since I'm not using leverage and live below means I can afford to wait even though my income is down (my paycheck is denominated in AUM) and inflation moved my expenses up. focus on quality, dollar cost averaging, living below means, having cash on hand, not using margin, and you should be OK long term
Great stuff. Curious what your asset allocation mix these days is looking like (if you don't mind sharing) for equities / bonds / real estate / cash / gold / crypto / etc
Personally am all-in on equities (some cash). Will probably diversify much more post-30 but right now not sure it makes too big a difference. Hard to hold one's nose and buy RE these days anyway and REITs seem brutally tough in an environment of rising rates. Doesn't seem like there's a safe haven anywhere, unless maybe select CBRE for the inflation protection
95% stock, 5% cash, pretty much what it always is, may go 90/10 and sometimes 98/2 but thereabouts
No love for RE! Think the steady CFs aspect is quite attractive (much higher yield vs bonds for only a modest increase in risk). Though you do have illiquidity and unless you're a pro, you're not going to be getting consistently strong appreciation. Dunno, the thread you had posted on understanding RE was pretty enlightening -- from a cash on cash perspective the asset class does seem to make sense. Question is when to enter perhaps
Over the long term reits have inferior performance to stocks and the volatility is about the same, this even persisted during the last inflationary period (1945-1980), so they're not the best inflation hedge like everybody believes. Maybe over a 5-10y timeframe they are, but my time Horizon is longer and I don't believe in market timing so that's not relevant to me
EDIT: this is incorrect, the performance over very long time periods is essentially the same, while the vol is different. my memory was talking about house prices (case shiller), in which case performance is far inferior to stocks long term but that's only a small slice of RE
i don't need any more income
i look at total return so the fact a large chunk of the return comes from income means nothing to me
if you're talking direct versus buying REITs, direct re investing would mean I wouldn't be diversified and I'd have to break one of my cardinal rules: no leverage
therefore, I pass
EDIT: just wanted to confirm my data - S&P 500 has done 10.5% per year versus 9.8% for S&P US REIT (data only back to 1989 on my zephyr), which includes the worst 10y period for S&P 500 (2000-2010), only time periods REITs outperformed were 20 & 25y (bc of tech bubble mostly). vol for full time period was ~14 SD for S&P and ~18 for REITs, and expense ratio on the largest ETF tracking it is 50bps versus 3bps on VOO
if I stretch it back to 1979 the only NAREIT index outperforming S&P is NAREIT all equity and that's only by 15bps with a worse max drawdown, and I cannot find a single ETF that tracks it, USRT tracks a different NAREIT index
so yes, while it appears REITs are closer to stocks over very long time periods in terms of performance (I consider 10.5 & 9.8 to be essentially the same), they're definitely not superior
Two consecutive quarters of negative gdp growth is a convenient way to identify a recession. Tbh, I am not even sure of the origin of this definition. I guess the ultimate source for recessions is the National Bureau of Economic Research. They look at many factors to define a recession, including, as has been already mentioned, unemployment. I could be wrong but I do not think they mark recessions until they are over. The unemployment rate is very low compared to prior recessions but that could change.
The very high inflation rate is the key to all of this, as the Fed has to tighten to try to reduce it. I think it is very likely we are going to have a recession and how deep it gets probably depends on how much the Fed tightens. It almost seemed like the Fed was in denial about escalating prices. We kept hearing the word transitory and I guess if you say it enough times, some people will believe it. The initial increase in the fed funds target rate by 0.25% at the beginning of shift to contraction monetary policy when inflation was like 8% did not make much sense to me. At the time, only one fed governor supported a 50 bps increase and now they are doing 75 bps. I guess they are trying to make up for lost time.
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