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I am not changing anything in my portfolio. I didn't in any of the prior market implosions and don't intend to do so now. I won't like it but if we had another 2008 style event, one needs to remember the S&P500 peaked in Oct 2007, hit bottom in Mar 2009 and didn't return to its prior peak until about Oct 2013.... 6 full years later (dividends not included). Investors need to consider that as a real possibility, notwithstanding they'd be collecting dividends in the meantime.
The real question here’s “Will equity markets ever reach their previous highs again in our lifetime?”
 

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I suppose it depends on your best before date. I have no doubt about if for myself (10 years, maybe 15). A lot of poo can be flushed in 5-10 years.
I like your optimism. Although if you look at infamous Japanese Nikkei 225, at hasn’t reached its ATH from years ago.
I know, I know NA market is a totally different animal.;)
 

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I like your optimism. Although if you look at infamous Japanese Nikkei 225, at hasn’t reached its ATH from years ago.
I know, I know NA market is a totally different animal.;)
I like your pessimism, but when there's a bubble situation, I look at it the other way around.

Take NASDAQ for instead. One could argue NASDAQ took 15 years to recover... Obviously, when we're looking at the peak of a bubble, it'll take a long time to reach that again. And, sure, if you dumped a huge lump sum in 2000, it took 15 years to recover. But if you look at the bottom of the bubble crash in 2002, it has erased only 6 years of gains because in 2002 we were still higher than 1996 and earlier. I could even say that it erased only 4 years of gains because 1996-2000 was the period of gains, then it was the bear start.

About Japan, I can't deny that its index is choppy since 1992, though I haven't checked the dividend effect, but anyways, the bubble that peaked in 1990 arguably bottomed in 1992, which was erasing gains last seen in 1986, so only 6 years. To me, 1986-1992 is one story, then post-1992 is another story.
 

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Although it is possible that we see a Japan like recovery due to slower growth that comes from a maturing economy, we do have some differences. Namely, commodities to extract and export and room increase population and productivity through immigration. Japan had a much larger population density that did not encourage further population growth an aging population and declining birth rate which resulted in a lost generation that never found employment. It is possible to happen to us but less likely.

I don't expect a quick recovery like we saw in 2020 or even a sharp V. More likely a long drawn out bear with high unemployment. I will also note that I am great at making predictions. However, I am not very good at getting them right. :D That's why I buy throughout all market conditions. Anyone who got through 08 knows that this to shall pass.
 

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The real question here’s “Will equity markets ever reach their previous highs again in our lifetime?”
I'm confident they will, as long as you're diversifying between countries.

For example I think it shouldn't take too long for XAW or VEQT to reach new all time highs. Maybe within 5 to 10 years? It could be a rough few years though.

I also think the TSX should bounce back pretty nicely. Canada's valuations were lower than the US when all this started.
 

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I completely agree with you on all parts of this.

However, let's keep in mind that they might chicken out, which is an important reason to also maintain exposure to your various assets (especially stocks) because if the CBs chicken out, these assets may be your only protection from continuing runaway inflation.
Focusing on Fed and other CBs changing their tune. They will of course pause at some point. Now through September I expect them to get to their neutral range (~~2.5%) as quickly as possible as long as inflation stays hot. This is logical and symbolic. A policy rate below the neutral range is stimulative, and therefore contributes to inflationary pressure as it is still stimulating demand. Not a position they want to be in. Once they are at neutral they have far more flexibility on the pace and quantum of further rate changes.
 

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I expect them to get to their neutral range (~~2.5%) as quickly as possible
Well I thought the Fed was anticipating a 3.25% ish rate by year end

But I'm not sure how they can claim rates like 2% to 3% are "neutral" when inflation is running at 8.6%. Wouldn't a more reasonable estimate of neutral be something like a 5% to 6% fed funds rate?
 

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Neutral is what provides the long term balance of 2-3% inflation over longer periods of time. They will have to overshoot to tame current inflation but they will then need to back off thereafter. Real short term rates generally are just marginally positive.
 

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Canada inflation data for May is coming out this week. It's projected to be somewhere between 7 and 7.5% depending on where you look. It's not going in the right direction.
 

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I am not changing anything in my portfolio. I didn't in any of the prior market implosions and don't intend to do so now. I won't like it but if we had another 2008 style event, one needs to remember the S&P500 peaked in Oct 2007, hit bottom in Mar 2009 and didn't return to its prior peak until about Oct 2013.... 6 full years later (dividends not included). Investors need to consider that as a real possibility, notwithstanding they'd be collecting dividends in the meantime.
This is why you should buy during these periods because once it goes back to the peak, you gains should be much higher if you sat and did nothing.....buying right now. Bought when it was 10% under and now buying when it's 20% under...when it recovers,.I should be much further ahead
 

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Doesn't work when one is drawing down one's portfolio in my now 17th year of retirement and counting on my cash wedge to tide me through the next year or two.
Thats why I'm looking at my allocations and plans now, years out from retirement.
I want to have a good plan in place LONG before decision time.
 

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In portfolio draw down, it is a balance of having enough cash wedge to provide some cash flow wiggle room and sleep-at-night factor, versus not too much as to be a material drag on the portfolio. There probably is an analytical quantum computing answer to this somewhere but it still would not address 'just right' for the individual.

What I suspect is NOT a right answer is having cash drag waiting for an opportunity to 'buy low' when securities are on sale. Correction (or bear) sized buying opportunities don't come around with any predictable certainty.
 

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What I suspect is NOT a right answer is having cash drag waiting for an opportunity to 'buy low' when securities are on sale. Correction (or bear) sized buying opportunities don't come around with any predictable certainty.
I completely agree. An investor needs to stay nearly fully invested at all times. It's a really bad idea to cash out and then wait for the big correction in stocks... it may or may not come. It just can't be predicted with any accuracy.

I also have a cash wedge/buffer for withdrawals during tough times like today. I implement mine a bit differently, using a GIC ladder within my fixed income component. The GICs provide enough liquidity that I can withdraw and live off that cash. Same basic idea though.
 

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I completely agree. An investor needs to stay nearly fully invested at all times. It's a really bad idea to cash out and then wait for the big correction in stocks... it may or may not come. It just can't be predicted with any accuracy.
No, but the cost of having a bond position and rebalancing isn't too bad.
 
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