Canadian Money Forum banner

Have we already hit the bottom this year?


  • Total voters
    43
21 - 31 of 31 Posts

·
Registered
Joined
·
2,727 Posts
2 weeks ago, the forum voted 22-12 that the bottom has not yet occurred.

any change in feelings with re-opening plans starting to come out?
I voted I felt the bottom was in; certainly, the short term bottom is in, we are a heck of a long way from the bottom, it would require a 26% drop in an environment where most news is getting better, not worse. I see a lot of comments, from analysts, to institutional investors, to individual investors, that they are expecting another drop. And money is waiting for it. This often means that it is a self-annulling prophecy. Any dip is met with furious buying, which negates the dips.

I think it is ok to hold some cash or liquidity back for a buy on a dip, but I wouldn't depend on the S&P hitting 2000 or below for your next investment opportunity. There are a lot of values on the S&P 500 that will never ever be seen again. To paraphrase the great Peter Lynch, I don't know where the next 500 points on the S&P 500 will be, but I know where the next 2800 points will be.
 

·
Registered
Joined
·
10,092 Posts
^
Impossible to say. V bottoms are rare, so most expect a W bottom. I wouldn't be in a rush if you are planning to buy significant amounts. Last time, 08-09 the second bottom was many months after the first bottom. If there is a second bottom there is no way to tell if it will be lower or higher than the first one.
I think there is another bottom but also don't know if it will be as deep as the first. I think it will be Q2 earnings and GDP (more so than Q1 earnings and GDP) that will surprise to the downside and thus I expect another bottom in July or August. It really depends on how quickly and how much of the economy re-opens sooner rather than later, and perhaps more importantly, if covid-19 wave #2 hits with a vengeance or not, i.e. did the economy re-open too much and too fast. Too many unknowns yet.

Either way, I have done nothing going into this crisis and will continue to do nothing throughout this crisis....and the speculation is thus moot to me.
 

·
Registered
Joined
·
16,634 Posts
Speculating on market direction: I don't think we've seen the bottom yet. The only thing I've bought recently is a GIC.

But, I don't keep spare cash around for timing / buying the bottom. I recently boosted my cash reserve due to deterioration in business conditions. This reserve is meant to smooth over my volatile small business income and provide 2 years of living expenses in a worst case scenario.

My investment policy is to maintain my cash reserve or buffer, and invest everything else. If I end up with any spare cash beyond the needs of my reserve, then I will invest it.
 

·
Registered
Joined
·
560 Posts
I originally voted we hadn't hit the bottom yet on the basis that there wasn't a lot of clarity on how the pandemic was going to play out. Currently, I think market sentiment is right in how it's responding as there seems to be some positives with life starting to open up again. But if things get worse again because the opening up, and things need to be shutdown again, I can totally see the markets take another dive. I'm not too concerned about Q2 earnings news unless there indications that companies are on the brink.
 

·
Registered
Joined
·
1,536 Posts
The S&P will now have to drop over 25% to break through 2200. Do you think that's reasonable to occur this year? Even if a second wave occurs (which is probable), it won't be unexpected and people will know what to do. Plus, but the time a second wave might occur, the S&P will probably be another 10% higher from here, which means a 35-40% drop to break through 2200. I just can't see that happening. Logic or not.
 

·
Registered
Joined
·
962 Posts
I just pulled up some charts of the S&P and Dow... it looks to me like they're still in a huge bubble, especially taking the recent rebound into account. Then again, I never understood why the S&P went up ~50% in the last five years. I feel like the correction we had only brought us close to fair value, and the rebound has already brought us right back into bubble territory.

There seems to be a lot of unrealistic optimism that everything is going to go right back to normal (like we just hit pause and then play on the song) and people are going to resume spending exactly like before. I just can't see it... I suspect that many jobs won't come back and spending in certain sectors will take many years to fully recover.

Although I voted "no", I wouldn't say don't buy. If you're staying invested for more than 10 years, it probably doesn't matter what happens in the next year or so... but if I needed my money sooner I might think twice.
 

·
Registered
Joined
·
371 Posts
I struggle with this whole free market concept, because it is not a free market it is a controlled market. Remember when when the USSR had price controls for all goods and services ? That model clearly didn't work and here we are today and the central banks (US Fed) are/is buying ETFs through Blackrock - who would have ever thought.

I look at my XLS file and from what I see ....
HXQ (Nasdaq) is at 89% of the 52 wk spread
HXS (SP500) is at 69% of the 52 wk spread
HXT (TSX) is at 63% of the 52 wk spread

So, these positions and their strength do not look to be suffering right now. I would wonder how much these indexes are being driven from behind and are really not FREE-MARKET.....

We saw years after that GOLD prices were manipulated for years and now the stock market, bond market, ect, ect I think are just as contrived as the old gold market and probably the new gold market.

If Bernanke printed about 4.5 trillion USD and gold went to $1,800 USD, how if Powell prints 2+ trillion with a balance sheet now of 6.2 trillion how does gold sit at just over $1,700 USD ? Powells 2+ trillion was injected almost overnight - way faster than Paulson and Bernankes QE programs....

Its just not working the way you might think..... Long Canadain bonds also never really rose with the BoCs drop to Zero.

Thoughts ?

and should there be another drop ? If Powell will create trillions of USD as needed to buy bonds/stocks/ETFs/Mutual Funds/ect... ect... how can it drop ???

There must just be trillions of dollars just sitting on the side lines.... theoretically almost on the sidelines waiting as the Fed balance sheet ? no ?
 

·
Registered
Joined
·
16,634 Posts
Definitely not a free market when some entity is manipulating the cost of cash at 0.04% and also pumping trillions of dollars into the system! You can call it anything BUT a free market.

Then again, this seems to be what American "capitalists" like.
 

·
Registered
Joined
·
560 Posts
Just to re-visit this thread/poll, I read an article on the G&M behind a paywall that I found also published on another site that discusses the difficulty for investors to determine if this is a relief rally or bear market bubble. A summary of conflicting points:
  • The S&P500 trades at high 21.2x earnings while unemployment is at levels last seen in the Great Depression with a record 20.5m jobs lost in April.
  • A Bank of America study indicates that the S&P500 has never reached a bottom in less than 6 months after falling more than 30% during a recession.
  • On the otherhand, it's argued that this time kind of different due to unprecedented levels of support by policymakers like the Fed.
  • And the rally has lifted the S&P500 above its 200 day moving average with more than 90% of the index's stocks above their respective 50 day moving averages.
 

·
Registered
Joined
·
3,349 Posts
I think we're going to see another bad quarter, as the unemployment and locked down economy hurts financials of small businesses and individuals.
The P/E of 20x is only based off trailing financials, this is going to get way worse.

That being said, I think it will only take a few quarters before we forget and are "back to normal".

I think policymakers have offered unprecedented levels of support, but they are really running out of ideas to offer more.
Rates are 0, they've tried a lot of new tricks.
The next economic problem, they'll have even fewer tools.

The problem is governments have built up massive debt, and kept rates too low for too long. They're running out of tools for the next problem There is no political will to prepare for the next economic problem.

That being said, I think we're going to see much lower investment growth than in the past, I'm thinking low single digits. There is a real risk that inflation will become higher than many investment returns. However that's still better than deflation and massive debt defaults, which is the alternative.

In short, I think we're close to the bottom, more bad news is coming, but there isnt' much upside for a long time.
 

·
Registered
Joined
·
59 Posts
The S&P will now have to drop over 25% to break through 2200. Do you think that's reasonable to occur this year? Even if a second wave occurs (which is probable), it won't be unexpected and people will know what to do. Plus, but the time a second wave might occur, the S&P will probably be another 10% higher from here, which means a 35-40% drop to break through 2200. I just can't see that happening. Logic or not.
I agree with this. Not to mention that the market has so much government support
 
21 - 31 of 31 Posts
Top