No. of Recommendations: 10
rayvt opined that this was a correction, not the beginning of a long bear, because: "A bull market ends when there are no more buyers remaining. For the first 1/3 of the bear there are only people gradually selling. A sharp drop is people selling in a panic. That's trading on emotion, and emotions are fickle so they can turn on a dime and buy again almost as quickly."
I wouldn't count on what 'generally' has been the case to hold true when the economics of the global business community just changed so radically, so fast. There should be zero surprise that the stock market would react rapidly and violently to what Trump has done. Unease was already rising from the hatchet job on the federal government and the uncertainty that that was creating, and then to abruptly erect such massive barriers to global trade, with clear negative implications for inflation and for economic activity, of course we have an ongoing massive sell-off.
Will it continue into an extended bear? The longer we go without a reversal of most of the tariffs, the lower it will go, because the stock market is still very richly priced from an average valuation standpoint (CAPE = 30.6 now vs an average of 18.6 since Jan. 1941), that is, it's priced for growth, but the tariffs will deliver contraction, so it's entirely rational for the market to adjust to the new reality.
If Trump declares victory and goes back to something more measured and sane, then there becomes the possibility of a turnaround, but if the tariffs have already plunged us into a recession, which is probably happening at the moment, then the bear may assume a momentum that a reversal of the tariffs won't be able to stop.
Trump is pretty unpredictable, but I don't think he'll be very quick to make any very broad reversal of the tariff policy. A vicious, recession-fueled bear seems more likely than not to me.
Small cap stocks are already down ~28%, and my fave small cap value fund is down 34%, and that's from a valuation that was only very modestly over average at the peak. Good buying opportunity, but a much better one is likely coming, IMO, and I'm waiting it out for the moment.
I'm still mostly invested in the stocks and funds I was in before this nonsense started and I'll just ride it out, but I did raise some cash over the last few weeks with the intent of bargain-hunting.
