And I do agree that markets are overvalued. No question. My portfolio is in stocks that shouldn't really get hit in a correction. The larger issue is the "when?". Also, the scale, the consequences... that's much harder to recognise.
Here in the UK, we're in a "recession." Nothing feels like it's different, though - if anything, it's better than 2022. In fact, UK stocks are actually doing ok now.
Your inflationary comments are strange. In the end, costs always get passed onto consumers. Firms won't do it until they have to. Why wouldn't it happen in 2024? As for cutting costs to protect margins, well, that's always happening where necessary. How does that link to layoffs? FWIW, I don't see layoffs, either. There is largely demand for workers. And tech companies just laid off loads of workers in 2022.
As for the Mag 7, it's too hard to say. Meta share price crashed then rose massively. That only proves market inefficiency. Many stocks have done more than 300% in a year. That's not a definitive sign of bubble. You link advertising and layoffs. I'm not so sure. Would people stop using Google in a recession? Meta's similar. Multiples have to come down. Profits will rise. If profits grow at crazy rates, the correction will be delayed. A government lawsuit and a chunky fine may also have the potential to kill the stock - but who can predict it?
You use Tesla as an example but Tesla is proof that it's not so simple. In the beginning, Tesla had been delivering on profits and revenue growth so the stock kept rising as analysts pushed up estimates exponentially. Then, they further proved their ability to make real profits. But only now as profit margins fall and revenue growth slows, analysts are rethinking Tesla's valuation. It's literally taken 3 1/2 years to finally to show some rationality - and in that time, Tesla's economics have changed drastically! Tesla isn't a tech company, either - their customers are ordinary people making a massive discretionary purchase (even with price cuts). My point is that this will probably take time.
Nvidia, too - Nvidia made a bigger profit in 2023 than they made revenue in 2022! If they continue to deliver on results, how can the stock possibly fall? There has to be a catalyst. Who cares that 19% of their revenues come from one company? For many industries and, especially, smaller stocks, it's not that strange.
As I say, unless WW3 breaks out, I can't see a direct catalyst that really "crashes" this market. Yes, commodities and yields are rising but until that affects bottom lines in the sectors we're speaking of, the market won't care.
The problem with your list is it makes you sound like a "permabear". I do concede that it's a dangerous mix all at once and that certain industries are in for a shock, but I don't think it's enough to get panicky and sell everything. I'm certainly not sweating. Other problem is, nothing you're saying is unknown. Unless there's something akin to a housing bubble brewing that few people have taken note off...
I don't know options (and their accuracy) well enough to comment, but I'd ask to see the chart for the last 70 years to have a better understanding of what's being said.
I believe it's a few months after bears throw in the towel, retail pile in and Wall St get out that it's time to exit the market. That's what I'd follow if I were you. I don't care enough to do the research because it only makes sense to sell if your portfolio is ripe. Mine certainly won't be whenever the correction happens.
Also true that BTC peaked a couple of months before the general market, too, so that's something I'm casually watching. Maybe it did peak?
Anyway, I think we agree on most stuff except the timing and the scale. I think you believe this to be more scary than I and I think you think it's coming soon. I wonder if it doesn't come for a year (hypothetically, of course), would you be tempted to get back into stocks?
Best,
Harshu |
