Is this a Recession, Depression, or Something Else? What's Next?

[kissindicator]

What goes up has to come down at some point. Sometimes, markets go down because they went up - a lot. We were really spoiled by the "Trump bump" of 2017. Did you know that 2017 was the only year ever that the S&P 500 went up each and every month? That's great and mutual funds made a lot of money. But remember, people have very short memories. Investors, in their 2017 exuberance, forgot that market volatility is normal. Now, it goes without saying, that the volatility we've seen in 2018 has been a lot more severe than anything we've seen in recent years. Why is that?
One main reason, above all others, is fear of higher interest rates. Times does not kill a bull market, central banks do by raising interest rates. It's necessary, and unfortunately, it does slow down the economy. It takes a long time for those rate hikes to impact the only thing that drives equity prices over the long term: corporate earnings. Clients' fears of an impending recession are unwarranted - it hasn't started. When was the last time a recession started with record low unemployment and record corporate earnings?

 

[new_trader]

Times does not kill a bull market, central banks do by raising interest rates. It's necessary, and unfortunately, it does slow down the economy. It takes a long time for those rate hikes to impact the only thing that drives equity prices over the long term: corporate earnings. Clients' fears of an impending recession are unwarranted - it hasn't started. When was the last time a recession started with record low unemployment and record corporate earnings?

You only seem to know half the story. Central Banks cause malinvestment in the first place when they 'print' money and keep interest rates too low for too long. The distortions in the economy (and bubbles) the Central Banks created by their cheap money policies obviously try to correct when they remove the liquidity and raise interest rates.

 

[tomorton]

Questions like this seem to be vital for many small market participants. For them, it seems essential to know if this year will be a bull or a bear, or if a bull run will end in a crash. And when will it crash and how far will it fall, and when can you buy at the cheap end?

Yet, these are only the right questions if you're playing the wrong game. There are only two games to play -
trading - go long in the uptrend, go short in the downtrend: never own
investing - buy shares for dividend income and pass them on to your children, who will pass them on to theirs: never sell

But there are also:
mugs - buy stocks for price appreciation in bear markets, sell in bull markets: never win.