A post was split to a new topic: Benchmarking the Market
Essentially, the often preached âstay the courseâ is exactly this: Donât get sidetracked, keep a healthy and distanced perspective from things that lie outside of our influence and (as a consequence) do what you know is right for you.
I do agree that things look more grim now than before. Your list of calamities above was certainly a bit shorter a few years ago. But this too shall pass.
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What will keep investors from profiting during this process is making emotional decisions, which is what many of the wealthiest and most successful investors hope they do. Wall Street loves a good panic that leads to capitulation, so that the investment firms with a well-informed understanding of the true value of the risk assets they follow can swoop in and buy them on the cheap. The billionaires who have made their fortunes in the marketplace are no different. Thatâs why I always take what they say with a grain of salt. They will warn of pending doom in one hand, while buying hand over first with the other. You only learn about what they were doing after the fact.
(Just some random article)
https://seekingalpha.com/article/4544024-the-bottoming-process-is-ugly
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Who said that?
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Let me preface this by writing that buying and holding requires none of the 8 hours Iâve spent this weekend trying to wrap my head around this. There is a reason it is an amazing strategy for retail investors and peace of time and mind is part of it.
That being said, the Fed board is having a meeting next Monday that was not scheduled until last Friday. The topic of discussion will be rates and since theyâve had their last scheduled meeting no later than a week and a half ago, I guess that means that things warrant a new assessment based on new information that has become available recently. The meeting is scheduled for after the US stock market is closed, so moves in the market will probably happen through futures during the night, and on Tuesday.
News since their last meeting, as far as I can assess it, would include:
- Putinâs threats and annexion of parts of Ukraine.
- Hurricane Ian hitting Florida and Cuba.
- The UK mess.
Theyâve aslo got a bunch of US economic data on Friday including:
-
Personal income for August 2022
rising slightly faster than inflation - inflationary. -
Consumer spending for August 2022
rising at the same pace as inflation - inflationary/neutral. -
PCE (personal consumption expenditures - a way to measure inflation favored by the Fed) for August 2022
above the Fedâs assessment communicated after their last meeting, potentially denoting stronger and more persistent inflation than expected. -
Chigago PMI (purchasing managers index - a measure of the health of manufacturing in the Chicago region, kind of linked with GDP) for September 2022
below expectations and contracting. -
University of Michigan Consumer Sentiment Index for September 2022
below expectations and very low.
We seem to be at the stage where the economy starts to compress, while simultaneously facing an increased risk of stress on financial institutions, the credit market and access to financing, while inflation is still high.
Inflation calls for tight monetary policy. A potential need to input liquidity to alleviate financial stress would go the other way. Iâm not sure where Iâd think the Fed stands on that one. My guess is that, in order to keep doves and hawks moving in locksteps together, they had agreed to meet again when their actions would start to exert real pressure on GDP and given Fridayâs data, that time would be now. Iâm bearish but the pendulum could really swing either way in my opinion.
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What is the connection between the Fed meeting and the UK?
And, by the way, whatâs happening in the UK is way bigger than it might seem at first sight.
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This is the first time Iâm paying some attention to what influence the fed has on both the economy and markets - kind of fascinating and very creepy at the same time.
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Please note that I have no background in economy nor finances and that all I write is just speculation based on the information I manage to find.
There may not be a connection. Only the Fed knows why exaclty they have summoned this meeting but, for me, if there is one, it would be pension funds. While specific in its nature, and not really applying to the US, the UK budget/bonds/Bank of England crisis is a reminder that bonds are used as collateral by institutional entities and that rapidly falling bond prices put them at risk of not being able to cover their liabilities.
The Fed has conducted a stress test in June that should back their assessment that their current policy can be withered by regulated institutional lenders and pension funds but their actual trajectory could appear to differ with the tested scenarii as things happen.
Though now that you ask the question, it doesnât seem to be the strongest point in my reflexions so that would weigh in favor of them hiking a bit more rather than decreasing their rate of increases or pausing it. Iâm still low conviction on that bet, though.
Edit: I have to amend that: it might be liquidity issues happening. Banks are flush with cash and reverse repos at the Fed are increasing (banks parking their cash at the Fed for the night, if I allow myself dirty shortcuts to make it simple) despite the tightening policy of the Fed, so cash is circulating less, which was the intent of their policy, though it may need monitoring and credit could freeze too quickly if they go too fast. Liquidity issues is what led the Bank of England to intervene and buy bonds. It would be one of the reasons that could make the Fed switch gears temporarily in my opinion.
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A week ago I threw 30k into VT. Not sure if it makes me dumb, mad, or brilliant, but I felt I gotta do it. I promised myself to buy more when the time comes and it seems like it came. Although I might have done it a bit too early - well, I guess itâs better too early than too late.
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Gotta correct this: the meeting is happening at 11:30 am EST, so 5:30 pm for us. Sorry for this mistake.
If you were following your IPS then it makes you at least disciplined and in control of your finances. 
Better being invested than standing at the sidelines and waiting.
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Meanwhile, main title on yahoo finance:
Stocks bounce as Wall Street crawls out of a brutal September
and stocks are really up for now.
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He said âhalfway thereâ
By the way the FED was clear on the 2% and this comment I read on SA itâs quite accurate:
âGoal is to make sure all that cash is parked in deposit reserves before the federal reserve even attempts to start unwinding. There is no way inflation will ever be under control as long as investors have in mind to park that cash back in equity markets. Equity markets promote speculation. The Federal Reserve will not tolerate that kind of thinking amidst record inflation within the past 20 years. This is what millions of people are failing to understand!â
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I salute you. Iâve been buying all the way down from April to present, and Iâll stay the course. Itâs an exciting ride 
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not necessarily in a bear market 
But it depends if he has another 2-300k to throw after the 30k when it reaches -50%
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I have about 4k a month to throw at it. At least until I lose my job. It should be fine though.
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I agree, still doesnât feel like full panic mode yet, I expect bigger things to break (UK, Italy, China,CS/DB,âŠ) and I got a big pile of cash waiting for that moment when everybody is running for the exit screaming and selling their assets for cheap 
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if you do, hit me up, i might have something for you
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Just keep in mind there are literally tens of millions of you doing the same, hunting the bottom â this means the bottom might never come, or not in a way or form you have predicted.
Iâm not expecting any V shape drop but rather a a long stretched bottoming process where sideline money will keep buying the dip like thereâs no tomorrow. (And THEN it can drop another 40% 
)
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But thatâs the thing. I read in one article that basically any investor younger than 50 had personally experienced in investment either a full blown bull market with falling interest rates or a crisis in a full panic mode (dot com crash, subprime mortgage crash, COVID crash). What we have now is a normal recession. Yes, rates and prices go up, inflation is soaring, valuations go down, but thatâs it. Even the war in Ukraine is too far from US, which is >60% of global market capitalization.
Some authors had even suggested that private investors have learned to stay the course and not to panic sell in downturns 
.
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