the Russian Flu pandemic of 1889-1890 was followed by a recession in 1890 and 1891;
the Spanish Flu of 1918 was followed by twin recessions of 1918-1919 and 1920-1921;
the Asian Flu of 1957 to 1958 coincided with recession during the same years;
the Hong Kong flu of 1968-1969 was followed by the 1969-1970 recession
What I’m suggesting in my previous post is that this recession would have happened despite covid-19. As evidenced just above, this pandemic has the potential to exacerbate the situation. And, I’m not suggesting anyone time the market, but at very least you should balance your portfolio for risk.
Ah no, with “cash proportions” I meant you can choose between almost 0-100% (in discrete increments of 20%) to go CHF.
On one side I am tempted to partially step out, but I am not doing it in my IB (unrestricted) portfolio either (as a matter of fact I was purchasing some more through previous weeks).
So really finding no rational reasoning why I would go that way (especially as rebalancing can only be done 1st of each month, i.e. totally unflexible).
On the other side I am thinking to even pay a piece of my yearly amount in.
So as usual when undecisive - I will do nothing.
Now it might be coming indeed.
I’m not buying the self-fulfilling part of it in the way it’s presented in this article. The Fed is signaling very openly that they are going to fight inflation as long as the economy can support it. The way they display the priorization of their mandates, it is 1st full employment, 2nd stable prices, so they’re likely to revert if a recession becomes a credible prospect and markets participants know that because it’s been widely communicated, and the Fed has already bailed off of raising rates in the past under Powell.
That other effects are happening and that some participants may consider a recession is coming because yield curves have inverted may very well be but I’d be very surprised if the narrative is “the Fed is willing to lead us into a recession so a recession is coming”. That being said, I’ve been surprised before by what seem to have actually been priced in and more often than not these past few years.
“This time it’s different!”, every emotion-driven investor, always.
Inflation is so high that it’s difficult to draw conclusions based on nominal rates.
If you assume, say, 5% annual inflation over the next two years (which is probably an understatement since the current inflation rate is 8%, with an accelerating trend), the real 2Y interest rate is in the -2.5% area.
For 10Y, the real rate is close to 0 if you trust the “market”'s 10-Year Breakeven Inflation Rate.
Under these assumptions the yield curve is far from inverted. But it’s one of many scenarios regarding future inflation.
The Fed is actually loosening: compare the +0.25% hike to the +0.5% change in annual inflation (from 7.5% to 8%) in one month…
shall we resurrect this thread then?