Reflections on the stock market
The stock market partially recovers today, then drops again:
The Dow Jones Industrial Average dropped 320 points after giving up an earlier surge of 1,460, while the Nasdaq composite lost 2.1%. Uncertainty is still high about what President Donald Trump will do with his trade war. The latest set of tariffs, including a massive 104% levy on Chinese imports, are scheduled to kick in after midnight.
What does it all mean? It means that people are nervous and that change is in the air.
I watched a good podcast discussing tariffs yesterday. Here it is in its entirety, but it’s not necessary to watch the whole thing to get the gist of it:
The other thing I need to say is that my sense of the stock market has always been that it is risky. Even bonds can be risky; my very first experience with investing came when I was 21 years old and my father gifted me with three thousand dollars and told me to buy a New York City bond with it. My father was ordinarily very good with money, but New York almost went bankrupt while I held that bond and there was a lot of stress involved.
Then, as young parents, my then-husband and I lost an enormous percentage of our still-meager holdings in 1987. I wasn’t the one who had decided to invest the money; my husband was. But it never occurred to me to blame him because without his investing our money would never have grown in the first place.
Then, as a newly-divorced person, in 2008 I lost over half my still-not-enormous worth in the 2008 crash. It came back, but it took a long long time and much angst. I had so many other difficult things on my mind back then that I didn’t stress out too much.
Will this be different? Will this be better or worse? I certainly don’t know. But at the moment I’m philosophical.
A decline of 20% or more is roughly defined to be a bear market drop. The Nasdaq, while not the main benchmark index, is down 24.4% today. Pretty ugly. The S&P500, which is the main benchmark, is down 19%.
The 2007/2008 credit crisis, had one bear market drop on top of another. Two back to back. The Obama admin used to brag about how great the market is/was in their time, but they used the market bottom in March of 2009 as the starting point. Thereby ignoring the fact that there was a second bear market decline after Obama was inaugurated.
This business of a 104% US tariff on China is certainly dramatic. I’m not sure China’s economy can withstand it. I’m guessing that either one or both parties capitulate, or China heads toward a depression.
“The stock market is not the economy” – Robert Reichs-minister
I hadn’t followed the stock market on a daily basis in a long time so I decided to look at some long-term trends. Using S&P 500.
https://www.macrotrends.net/2324/sp-500-historical-chart-data
This chart is logarithmic and adjusted for inflation. Set for 20 years it shows a nearly uninterrupted rise from the bottom in 2009 until December 2021. Yes even the onset of COVID caused only a brief drop and a quick recovery through the worst of the pandemic. Then after losing 25% in about a year it recovered and kept going up and up and up until February of this year.
If you ignore the very brief COVID dip this is by far the longest uninterrupted period of growth for the market ever, at a time when I don’t think most Americans would say the economy was going great guns. I suspect the trillions of dollars pumped into the economy by the Fed through “quantitative easing” helped to fuel it. Without dismissing the dramatic effects of Trump’s tariff policies there is a good chance we were due for a “correction” soon regardless. P/E ratio is also quite high historically, an indicator of an overbought market.
My daughter works in wealth management. Her company is telling clients to just hang in. She also told me the market is information driven and prices are based off of predictions of the future. That’s why the market likes stability even if not tied to actual economic growth.
Being an ignorant physicist I take what she says. She did arrange my distribution such that, before this drop, my total assests were higher than when I retired despite payouts.
Buy low, sell high. Otherwise, don’t pay any attention.
I have the bulk of our money in Money Markets. Don’t make a lot, but then I don’t lose it either. I am very diversified, but don’t really have any Bonds. I saw our bond holding drop big in the 2007-8 drops.
Waiting for the other shoe to drop…
Sounds like some very bad stuff is about to be made public.
I hope this doesn’t sound like bragging but it’s probably a result of being raised by depression era parents. I hunt. And farming gives you away
Farming takes land. It’s hard to hide a farm. I don’t have a problem defending myself but you never know about battle injury
In ’87 and again in ’08/09, my 401k looked like a 200.5k. Now, in mty mid-70’s, I don’t care. My retirement is in an annuity, and will not suffer much.
Correcting decades of trade imbalance is not easy, and there will be a price associated wtih that.
This is what I voted for. Blow it all up, and then make the rubble bounce.
A major course correction is necessary, or we reach a point of no return.
I’ve been investing since the 70s, when I was still in high school. Not an expert by any means, but over time I’ve picked up a few things. I’ve ridden through all the bear markets since that time, to varying degrees of heartburn. But I’ve never panicked, and that’s the key. Steady on: The US markets always recover and they will this time, too. I’ve been certain that the market is way over-valued for well over a year, by any historical measure. When people start saying it’s some kind of ‘new paradigm’ when there’s an uninterrupted bull, I’ve learned it’s time to accumulate cash. Right now I’ve got my portfolio managers sending me emails and phoning in to pat my hand, but as I’ve already told them many times, I don’t need reassurance because the markets puke. I’m almost ready to start jumping in, now that stocks and bonds both are correcting. I wouldn’t tell anybody to sell anything right now, unless you’ve got some kind of unusual circumstances driving your reasons. Good Luck to all if you’re investing, be wise with your choices and mindful that we could have a recession – we’re overdue.
Yes, I think the stock market was pumped up artificially by the Fed for years. Hang on. This will stabilize.
The Consumer Price Index is used to measure inflation, which doesn’t include housing or stocks & bonds. When govt prints money, and those getting the free cash buy stuff, the prices rise since there wasn’t an increase in the stuff made.
Thru Obama, Trump 45, & Biden, the govt has been printing money but a huge amount has been going into assets—asset inflation, not consumer goods. When the govt reduces the money printing, all inflation goes down, including assets.
The next week, or month, or quarter, will likely be a bottom, or a false bottom followed by a deeper bottom. Holding is a good idea, but selling for cash now to buy later might be a better idea.
As noted, the Price/Earnings ratios have been high for years, yet kept going up, waiting for a trigger for those wanting to cash out at the peak, or close to it.
Trump’s focus on trade, and mfg in America, are good for US workers, and the medium & long terms. Short term uncertainty is bad for risky stocks.
Losing paper wealth always feels bad, tho. Those getting wasteful govt spending don’t like losing easy money either.
Somewhere in Delaware,
an old man smiles and whispers:
“Miss me yet?”
The Biden Administration pumped it up , Whenever the Republicans are in power the market goes down just before the election like clockwork. This time it maybe too early.
“Yes, I think the stock market was pumped up artificially by the Fed for years. Hang on. This will stabilize.”
Kate you are exactly right. The Fed kept interest rates so artificially low for far two long.
It punished any traditional savers, forcing them into the stock market to keep up. Even when many investors were at the stage of life they needed to move out of riskier investments.
Two years ago buying a CD was yielding approx 1.2-1.4 percent in my area. 100k investment was bringing back 1300 before taxes. Usually 7-800 after. And you had to agree not to touch that money for the entire year. You were far better off paying down your debt and making home improvements to stay ahead of inflation.
Right now I am seeing approx 4.2-4.5. Which low is still miles better than what it was.
Equity is nothing to invest in if you need liquidity and can’t ride out the occasional downdraft. If you have to be able to liquidate your investments to get by, diversified low-risk bonds or money markets are your best bet.
We’ve weathered quite a few stock market downdrafts, but you don’t lose if you don’t sell.
AppleBetty at 9:16:
Somewhere in Delaware,
an old man smiles and whispers:
“Miss me yet?”
Good God, no. Never.
The Old Man in Delaware still thinks he is the POTUS.
FJB and his whole crooked clan.
The tariffs are a big gamble. DJT is used to making big bets. The odds are in his favor. Most of the trade cheaters need our consumer market. They have done quite well by selling their goods here and protecting their producers.
The stock market, especially the big investment banks, don’t like the idea of anything changing. They don’t care that the American middle class is shrinking, and our jobs have gone overseas. They hate that Trump is trying to reclaim some of those jobs.
It’s a titanic struggle. For those who are young or don’t need the money, stay the course.
Rough seas ahead, but the USA has sailed through some very rough times and still emerged stronger. We have so much going for us – abundant farmland, oil/gas/coal, timber, engineering know how, private property protected by courts, and much more. Don’t bet against the USA.
You don’t lose if you don’t sell. Temporary declines are not losses. Any money you need in the near term should not be in risk assets. This is not hard in theory, but seems extraordinarily hard for a lot of people in practice. The apocalyptic “news” doesn’t help.
Which begs the question: WHY??**
“Elon Musk Says Peter Navarro Is ‘Dumber Than a Sack of Bricks’;
“Musk is right. Navarro is a socialist with foolish economic views who should never have been put in charge of anything.”—
https://reason.com/2025/04/08/elon-musk-says-peter-navarro-is-dumber-than-a-sack-of-bricks/
H/T Powerline blog.
**That is, WHY is Peter Navarro anywhere close to the president?
Another view
https://johnkassnews.com/in-this-time-of-wall-street-panicans-and-democrat-fear-mongers-what-do-we-owe-americas-children/
At the current rate, this “c’est la vie, it’s only the stock market” rationalization is probably going to be good for another day or two at most.
@Barry Meislin – Trump is a crackpot who has a destructive tendency to surround himself with other crackpots. During his first term, he had no large group of supporters, and therefore most of his advisors were traditional Republicans plus Ivanka and Jared, who I do not believe to be crackpots. Those advisors were able to persuade him to hold most of his basest instincts in check, at least until after the 2020 election. This time around, all of those advisors have either left (Ivanka and Jared), or been purged (the so-called “RINOs”) leaving Trump to be Trump.
In other words, to answer your question – WHY is Peter Navarro anywhere close to the president? Because Trump wants him there.
https://the-pipeline.org/the-column-tariffs-arent-the-issue/
CC™ chimes in with his latest tired version of The Great Orange Whale is a exestential threat to the universe.
It was obvious that the US could not indefinitely continue on a part of excessive offshoring, wild deficit spending, and China dependency. But it was seemed easier..less-risky…to continue on the path we were on and hope that something would turn up.
I keep thinking of a remark made by @theannagat at X: “All the risks you didn’t take come and take their revenge.”
There is plenty to criticize about the way Trump is going about this, but there was plenty of hidden risk in letting things ride.
Earth to Bauxite: the current valuation of the S&P 500 would have been an all-time high a little over a year ago.
Earth to FAOF:
1. “All-time high” and “overvalued” often coincide, but are not necessarily the same thing.
2. Even if one assumes that the market was overvalued, you’re justifying the result rather than the action. “Overvalue” in the market does not give the president license to implement whatever destructive policy he wants.
Arguing with MAGA is very much like arguing with Woke. It’s like trying to nail jello to a wall. There are threads and threads of twisted, contradictory logic that, ultimately, have no anchor in reality.
Trump just intentionally crashed the stock market. He’s promising a bunch of good results from doing so. Those good results are very unlikely to come about. The best case scenario is a very unevenly distributed set of wins and losses, and even then the chances of the wins bearing fruit before the next election are slim and none.
But hey, no worries. The stock market was overvalued anyway.
Meanwhile, back in reality, wiping out 15% of people’s retirement (and counting) and sparking a recession by clumsily launching a policy that your administration can’t consistently explain and that no one expected you to actually implement is a good way to get the electorate to promptly remove you and your party from power at the first available opportunity.
Patience for sudden downdrafts in asset values costs a time premium the elderly can ill afford.
The market dropped 25% in 2022 under Trump – oh wait Biden was President then. Were you complaining here about people’s retirements being wiped out Bauxite? Or bashing Trump? No let me guess lol
“a good way to get the electorate to remove you from power”
Not to worry, Trump had no chance of being elected in the first place according to you.
OK, then…
“The Great Tariff Pause”—
https://blazingcatfur.ca/2025/04/09/the-great-tariff-pause/
Hmm. Could it be that Trump just “nail[ed] jello to [the] wall”?
Or maybe he listened to Ackman (and others) and gave the imperial thumb up? (What??! The man actually listens to people??)
Or maybe he just wanted to shake things up a bit (more)?
Master Maniacal Manipulator? Or Merely a Meshuggener Menace?
Ought one nod one’s head (from side to side) in sheer disbelief…or in adulatory amazement?
Or is it just a case of “But that orange-haired man, he be crazy” maneuvering to get more governments to the bargaining table as he aims to cut a veritable and vicious Gordian knot…with all the usual suspects breathing heavily—and malevolently—down his back…
Stay tuned …. And help yerself to some aspic.…
“It’s a global deleveraging,” says Dan Ivascyn, chief investment officer at Pimco, the bond powerhouse. “Markets aren’t fans of extreme uncertainty—unless we get clarity about tariffs, and the willingness to negotiate or be more gradual in implementation, people will likely continue to take their money home.” This is from the WSJ today.
Those PIMCO guys know their stuff. “More gradual in implementation” indeed.
@ Sennacherib “Whenever the Republicans are in power the market goes down just before the election like clockwork.”
(and a side note to FOAF)
https://babylonbee.com/news/analysts-clarify-that-trump-is-only-responsible-for-the-stock-market-when-it-goes-down
https://babylonbee.com/news/financial-advisor-announces-its-time-to-panic-urges-clients-to-make-hasty-emotional-decisions