If someone appears to be repeatedly personal, lean towards patience as they might not mean offense. If you are sure, however, then do not deepen the problem by being negative; instead, simply place them on ignore by clicking the unhappy yellow face to the right of their name.
- Manlobbi
Stocks A to Z / Stocks B / Berkshire Hathaway (BRK.A) ❤
No. of Recommendations: 3
I think that most observers agree that the risk of recession has gone up since Trump started slapping tariffs on our trade partners regardless of whether they were former ally or foe. By raising costs for consumers and businesses alike, it will surely drag down economic activity. Sky high tariffs on China will be especially damaging if they aren't rationalized fairly quickly.
The tariffs took all the headlines away from another potent source of chaos and uncertainty that was dominating he headlines before the last couple of weeks: Trump's assault on the US federal government, cutting jobs and funding of programs willy-nilly with little regard to whether or not the US people value what the former employees were doing.
The widespread uncertainty still weighs heavy on an enormous variety of businesses: from a non-profit that no longer gets federal funding and has to cut everyone loose, to any business that relies on an imported or exported finished good or part, especially from China. Will the 'reciprocal' tariffs come back after the 90 day pause?
CEOs will be trying to delay significant decisions and investments to see how it will sort out. Many businesses that rely on Chinese parts or goods will be crushed.
Without significant moves from Trump to reduce the rampant uncertainty in the economy, I see a recession as a virtual lock. It's earnings season now, and early reports have been good, but with the companies cautioning on the forward outlook. Earnings will be muddled by different effects, like a pull-forward of demand as people snap up inventory at current prices, but I think that as soon as next quarter some companies will experience serious negative effects, and two quarters out even more so. Stock market drops, declines in consumer confidence, increases in inflation expectations, and a Fed also sidelined by uncertainty all could feed together to create a serious recession in very little time.
CEOs are scared to speak out forthrightly, for fear of retribution by Trump, but they are sending out distress signals in muted language.
Of course I could be wrong, but I expect that a recession is already starting, and if a contraction isn't evident in the current quarter when it's reported down the road, then the it probably will in the next.
No. of Recommendations: 15
I agree that a recession seems pretty much baked in at this point. Even if all the announcements were reversed, the unpredictability alone has caused business investment decisions to fall off a cliff, and that alone is a big headwind for an economy. Multiple economies.
But recessions come and go. The mere fact of a recession doesn't really change the value of the typical stock, since almost all of the value of any equity is past the ten year mark. There is pretty much always going to be a recession or two in any given decade, much like any farm is going to have winters and bad crops off an on. Lean years, fat years, we all know the drill.
The BIG question, to me, is to what extent any of the recent global changes are longer lasting than a typical recession or bear market. If, for example, global trade intensity is going to be 20% lower in the next 15 years than it would otherwise have been, that is a true and lasting drop in value for virtually all companies bigger than a corner store, not a mere cyclical pricing change. There is a good chance, for example, that there are billions of dollars worth of factories and equipment and goodwill sitting on company balance sheets that are no longer worth anything at all, because they are located in the wrong place to sell profitably to the destination where their erstwhile clients are located. History shows us that tariffs are often very quick to add, but can take decades to unwind again.
I don't have an answer to any of that, but I think that is the interesting question to ponder. What, if anything, are the more lasting consequences?
Jim
No. of Recommendations: 4
Recessions come and go. The mere fact of a recession doesn't really change the value of the typical stock, since almost all of the value of any equity is past the ten year mark. There is pretty much always going to be a recession or two in any given decade.
Yes, agreed. However a recession does often affect the price of the typical stock, and that seems likely here. I'm currently in the midst of a rare, for me, attempt to capitalize on a seemingly exploitable situation, having upped my cash, and thinking about when best to redeploy. I don't want to miss the boat like I did in the Covid bear.
The BIG question, to me, is to what extent any of the recent global changes are longer lasting than a typical recession or bear market. If, for example, global trade intensity is going to be 20% lower in the next 15 years than it would otherwise have been, that is a true and lasting drop in value ... for example, ... billions of dollars worth of factories and equipment and goodwill sitting on company balance sheets that are no longer worth anything at all, because they are located in the wrong place to sell profitably to the destination where their erstwhile clients are located. History shows us that tariffs are often very quick to add, but can take decades to unwind again.
Yes, big question, indeed. Will Trump stick with his tariffs, if so which ones and how high? Seems like 10% globally and higher on China and other assorted countries is probably in the cards for his duration, but probably not 100+% on China for long. That seems like plenty to induce a serious recession and some quasi-permanent destruction of economic capacity if sustained for his term. Will the next President reverse course entirely, partially, or not at all?
If we do enter a serious recession with associated extended and deep bear market, will Trump declare 'victory' and relent? He is unpredictable, as is the economy, so I don't think I should hold out for a deep deep bottom that I may not recognize when it's there. So, my tentative plan is to re-invest after the first cluster of major bottom signals.
The meat of my plan is more about switching from highly valued large cap to cheaply valued small cap, but there is a timing element too, which may be dumb of me to even try.
No. of Recommendations: 4
No. of Recommendations: 0
The mere fact of a recession doesn't really change the value of the typical stock, since almost all of the value of any equity is past the ten year mark.
It might not change the value of the typical stock, but won't it surely lower the price as fewer people are buying stock and instead focusing on meeting living expenses and squirreling away money out of fear of what comes next?
