No. of Recommendations: 9
Well, if someone starts one I’m in. Meanwhile, I’m willing to predict it gets twice as worse as it already is. (I know, grammar.)
We’ve barely entered
“correction” territory: a 10% drop in the S&P.
Bear markets (20% drop) are not infrequent, we had one in 2022, another in 2020 (that one was artificial: pandemic induced panic). Bear markets happen on average every 4 years, but can be bunched up (as in 2020-2020) and sometimes longer, like when Obama and then Trump rode an economy rebounding from a catastrophe like the housing debacle of 2008.
In this case, I predict we’re on our way to a bear, so double what we have now, maybe more. It’s dependent on the toddler-in-chief to some extent, but once started even he wouldn’t be able to control it, even if he shut up and was hog-tied in his office with duct tape over his mouth.
Threatening the tariffs is only making people jump the line; I can see bars and liquor stores already stocking up on European wines and champagne over the
mere threat of 200% tariffs (threat made yesterday.) Even if it doesn’t happen, you have created a bump in the regular commerce flow (snake swallowing a tennis ball), a month or three later - even if the tariff isn’t enacted - they stop buying because they’re overstocked with inventory. Now the shipper lose a little business, the bottlers slow down, the distillers slow down - all of which can lead to a few layoffs. Remember how supply chain bumps gave the economy contractions in 2020?
Now multiply by champaign, aluminum, steel, cars, electricity, oil, everything else Canadian or Mexican (also European and, why not? Add China), sports equipment, shoes, tools, etc and you have the makings of a recession. It’s a self-induced recession, but that doesn’t mean you can just snap out of it as easily as you snapped into it; it takes a while for a system to right itself. Workers have been laid off, hiring is slow, consumers have pulled in, businesses are reluctant to invest until they’re *sure*, etc.
Oh, and the countries we’ve tariffed are (obviously) going to retaliate, so the same phenomenon happens there, and *that* takes a while to straighten out, assuming the mindset rot sets in.
So far the business leaders I have read are saying (mostly in private but a few publicly) that business is fading: airline bookings, cars, consumer staples, vacation rentals, etc. all mildly or moderately heading softer. That’s a tell, for sure. Consumer sentiment just hit its lowest level in some time, 30% below a year ago, 10% down in just a month. All tells.
So yeah, probably a bear. No telling on the timing, whether it will be gradual or quick; if you put a gun to my head I’d say quick but I wouldn’t stand on the prediction, if only because things are so volatile now that I could be whipsawed and I don’t think the real damage has accumulated yet.
Anyway, Mungofitch thinks it’s not over yet, either:
https://www.shrewdm.com/MB?command=recommend&pid=8... 