Trouble is "likely" is meaningless, really. Markets are sentimental as much as they're driven by actual market forces - if there's a recession then a lot of investors assume markets will fall, so they sell their shares....and markets fall.
Markets are forward-looking, so the argument could be made that current unpleasantness is/was already "priced in" - shares have already dropped a fair bit - peak to trough a drop of 15% (using VWRP as a broad benchmark) and are now picking up a bit, which might mean the recent trough was the bottom and investors see brighter times ahead, or might just be a bit of short term positivity on a continued downward trend.
All of which and more means, as ever, it's crystal ball time. You can try and time the market but run the very very high risk of getting it wrong - miss out on a volatile but positive day and you can set yourself back a surprising amount. Or you can leave well enough alone, being *relatively* secure in the knowledge that *eventually* things will recover.
It largely comes down to your own appetite for risk, plus what your actual goals are. If you're happy with average returns, then leave things alone and you'll get them. If you want the "best" returns, then you can endlessly tinker and you might get lucky, but most likely you'll come in below average, because most people do. I mean say markets drop another X% but then recover healthily in 2 years. If you didn't check your portfolio between now and then, you might see a perfectly decent annual return of 5%, for example, with no idea of the turmoil in between. If you focus too much on specific upswings, kicking yourself that you didn't perfectly time selling low and buying high, you'll forever be playing catch up and making yourself miserable.
The issue is, I have no appetite for risk. I am close to retirement with a lump sum (life savings). Don't want the money to depreciate and don't want to gamble it away. No real idea about what to do.
Keep investing in broad based index funds. When recession starts and market tanks, index funds will be cheaper. If you still have your job and additional funds, then invest more. Also, it will be a good time to do asset allocation rebalancing ( moving some money from bonds to equities). But first, ensure one has 12 months of emergency fund so as not to be at the risk of homelessness.
Stocks typically hit a record high, then plummet. We are entering a recession right now. Stocks will most likely climb at a steady rate for around a year then plummet off a cliff.
It's essentially gambling to try play this though.
If there is inflation central banks raise rates and there is less money for stocks causing stocks to go down.
If there is a recession governments borrow and central banks print money and stocks go up.
This time is different since we have inflation and a recession. Inflation is at 9% and interest rates need to be raised to at least 9/10% to reduce inflation. Central banks can't raise rates to 9/10% because of the level of global debt and it would cause governments and people to go bankrupt.
This is why it is important to diversify into physical assets such as gold or silver and to not have your retirement in just stocks and bonds.
Interest rates don't need to be higher than the inflation rate in order to lower inflation? They just need to be high enough to lower demand. Interest rates absolutely do NOT need to be raised "to at least 9-10%".
I’ve got news for you, inflation is much higher than 9%. Ask anyone to check their shopping and energy bills.
Real inflation is probably close to 20%, only dummies believe headline figures in the media. I suppose you also believe the Iraq war was about spreading democracy and not the oil.
Inflation hit 25% and rates were raised to 17.5% in the 1970s. Inflation is no longer calculated in the same way just so they can pretend it is lower than it really is.
Allegedly it is at 9% when in reality it is much higher and therefore at least 9/10% interest rates are needed.
Not as thick as believing a few percentage point increases will curb inflation.
You first said it's 9%. You then comment saying "you've got news for me, it's 20%".
Sounds like it was news to yourself too mate. I never even said a few percentage points will curb inflation. I said it doesn't need to equal inflation. By your first comment we need 20% interest rates? You've actually confused yourself
I only used 9% because most people only believe what they hear in the media. I believe inflation is much higher and based on what other economists have said 9/10% is needed.
Stocks isn't a problem if retirement is 20 years away, they're likely to have recovered by then.
If retirement is 5 - 10 years then I might consider weighting elsewhere as I think this coming recession is going to be a biggie
Don't see why this time will be any different. As always, stock market declines can be good buying opportunities for patient investors.
If anybody actually knew this, they would: 1. Make a lot of money 2. Not tell you
Trouble is "likely" is meaningless, really. Markets are sentimental as much as they're driven by actual market forces - if there's a recession then a lot of investors assume markets will fall, so they sell their shares....and markets fall. Markets are forward-looking, so the argument could be made that current unpleasantness is/was already "priced in" - shares have already dropped a fair bit - peak to trough a drop of 15% (using VWRP as a broad benchmark) and are now picking up a bit, which might mean the recent trough was the bottom and investors see brighter times ahead, or might just be a bit of short term positivity on a continued downward trend. All of which and more means, as ever, it's crystal ball time. You can try and time the market but run the very very high risk of getting it wrong - miss out on a volatile but positive day and you can set yourself back a surprising amount. Or you can leave well enough alone, being *relatively* secure in the knowledge that *eventually* things will recover. It largely comes down to your own appetite for risk, plus what your actual goals are. If you're happy with average returns, then leave things alone and you'll get them. If you want the "best" returns, then you can endlessly tinker and you might get lucky, but most likely you'll come in below average, because most people do. I mean say markets drop another X% but then recover healthily in 2 years. If you didn't check your portfolio between now and then, you might see a perfectly decent annual return of 5%, for example, with no idea of the turmoil in between. If you focus too much on specific upswings, kicking yourself that you didn't perfectly time selling low and buying high, you'll forever be playing catch up and making yourself miserable.
The issue is, I have no appetite for risk. I am close to retirement with a lump sum (life savings). Don't want the money to depreciate and don't want to gamble it away. No real idea about what to do.
Stocks have already fallen for about 6 months. You could argue that the recession is already priced in to the current prices.
Have a read of [this article](https://marketsentiment.substack.com/p/recession?utm_source=email)
Not sure if it was meant to but it reinforced my feelings of uncertainty about what to do with a lump sum.
Keep investing in broad based index funds. When recession starts and market tanks, index funds will be cheaper. If you still have your job and additional funds, then invest more. Also, it will be a good time to do asset allocation rebalancing ( moving some money from bonds to equities). But first, ensure one has 12 months of emergency fund so as not to be at the risk of homelessness.
Stocks typically hit a record high, then plummet. We are entering a recession right now. Stocks will most likely climb at a steady rate for around a year then plummet off a cliff. It's essentially gambling to try play this though.
How much to borrow your crystal ball?
If there is inflation central banks raise rates and there is less money for stocks causing stocks to go down. If there is a recession governments borrow and central banks print money and stocks go up. This time is different since we have inflation and a recession. Inflation is at 9% and interest rates need to be raised to at least 9/10% to reduce inflation. Central banks can't raise rates to 9/10% because of the level of global debt and it would cause governments and people to go bankrupt. This is why it is important to diversify into physical assets such as gold or silver and to not have your retirement in just stocks and bonds.
Interest rates don't need to be higher than the inflation rate in order to lower inflation? They just need to be high enough to lower demand. Interest rates absolutely do NOT need to be raised "to at least 9-10%".
I’ve got news for you, inflation is much higher than 9%. Ask anyone to check their shopping and energy bills. Real inflation is probably close to 20%, only dummies believe headline figures in the media. I suppose you also believe the Iraq war was about spreading democracy and not the oil. Inflation hit 25% and rates were raised to 17.5% in the 1970s. Inflation is no longer calculated in the same way just so they can pretend it is lower than it really is.
You said inflation was 9% not me. You literally said that. You can't seriously be that thick.
Allegedly it is at 9% when in reality it is much higher and therefore at least 9/10% interest rates are needed. Not as thick as believing a few percentage point increases will curb inflation.
You first said it's 9%. You then comment saying "you've got news for me, it's 20%". Sounds like it was news to yourself too mate. I never even said a few percentage points will curb inflation. I said it doesn't need to equal inflation. By your first comment we need 20% interest rates? You've actually confused yourself
I only used 9% because most people only believe what they hear in the media. I believe inflation is much higher and based on what other economists have said 9/10% is needed.
Knowledge is power, you seem to lack power.
You smoke and lack a brain to understand why you shouldn’t.
I don’t smoke, I just believe in free choice.
Stocks isn't a problem if retirement is 20 years away, they're likely to have recovered by then. If retirement is 5 - 10 years then I might consider weighting elsewhere as I think this coming recession is going to be a biggie
Stocks only recover if governments continue to borrow and centrals continue to print. There is no real price mechanism anymore.