STOCK MARKET WATCH -- Tuesday, 27 September 2022

[Tansy_Gold]

STOCK MARKET WATCH, Tuesday, 27 September 2022

Previous SMW:
SMW for 26 September 2022




AT THE CLOSING BELL ON 26 September 2022


Dow Jones 29,260.81 -329.60 (1.11%)
S&P 500 3,655.04 -38.19 (1.03%)
Nasdaq 10,802.92 -65.00 (0.60%)

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Market Conditions During Trading Hours:

Google Finance
MarketWatch
Bloomberg
Stocktwits

(click on links for latest updates)

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Currencies:













Gold & Silver:






Petroleum:

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DU Economics Group Contributor Megathreads:

Progree's Economic Statistics (with links!)
mahatmakanejeeves' Rail Safety Megathread
mahatmakanejeeves' Oil Train Safety Megathread

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Quote for the Day:


Politics doesn’t belong in a test tube; neither viruses nor bacteria are members of political parties. Scientists have often been wrong, but nothing has propelled our world forward more successfully or rapidly than the scientific method, based as it is on independent inquiry and a reliance on data that can be observed, tested, analyzed, and repeated.

Michael Specter. The Deep Denialism of Donald Trump. The New Yorker. 3 February 2017.

This thread contains opinions and observations. Individuals may post their experiences, inferences and opinions on this thread. However, it should not be construed as advice. It is unethical (and probably illegal) for financial recommendations to be given here.

[progree]

1. Well, it happened. S&P 500 set a new bear market closing low at 3655

down 23.8% from the January 3 all time high

previous bear market closing low: 3667, set on June 16.

It closed at 3799 the day before inauguration day, so we're down 3.8% from that point.

If adjusted for purchasing power ... ughh.

[Tansy_Gold]

3. Here's hoping THIS reply doesn't get zapped

All this brings me back to my original question from umpteen years ago that ended up putting me into the Stock Market Watch posts to begin with.

Does it really matter all that much to the grand scheme of things what happens to The Markets?

I'm assuming -- with full knowledge of ass-u-me -- that the Fed's raising of interest rates is what's spooked the markets. But if the Fed doesn't raise interest rates, doesn't that allow inflation to continue to rise, hurting the working folks far more than the uber rich?

And if the markets decline, it hurts the 401K folks, but didn't they all go into that with full knowledge that it's always a gamble? I mean, come on, we've been watching this since 2008 at least -- and some of us go back to '87 -- so at what point do we just say enough is enough and let it drop back into the realm of reality?

The rich won't be hurt by this. They'll scream and cry that they are and that the Fed needs to lower interest rates so they can build another billion-dollar yacht. Where's the relief for the rest of us? Where's the increase in minimum wage, in SS benefits? I'm sure this big scare is now going to axe student loan relief, too, because heaven forbid Bezos or Musk or a Walton lose a billion or two.

[DemReadingDU]

4. yep, markets are just another gamblling casino

and I am not playing.

The rich likely have already exited the casino with their winnings, leaving the remaining gamblers holding empty bags.

[progree]

5. Because U.S. stocks have had an average 8.6% annual return since Jan 2, 2008. 13% since Dec 30, 2008

Last edited Wed Jan 25, 2023, 03:12 PM - Edit history (9)

and about 10.3% since the middle of 1987 (all figures are average annualized returns).

Using the broad-based S&P 500 as a proxy for U.S. stocks overall. The S&P 500 is about 80-85% of the total U.S. stock market capitalization. The remainder -- midcaps and smallcaps -- have had an even better overall record. I use the S&P 500 because data about it going way back is easier to find than total U.S. stock market.

we've been watching this since 2008 at least -- and some of us go back to '87

The 8.6% average annual return since Jan 2, 2008 corresponds to a doubling time of 8.4 years. (This includes reinvested distributions. Based on the Vanguard 500 Index Fund VFINX from January 2, 2008 to today's (Sept 26) close). A total U.S. stock market fund would have an even better record).

Edited to add: January 2, 2008 was a relative high point in the market, shortly after the October 2007 all-time high. Measured from year end 2008, December 30, 2008 thru today's close, VFINX had a 13.0% annualized average return, corresponding to a doubling time of 5.7 years.

As for from the middle of 1987: a 10.3% average annual return corresponds to a doubling time of 7.1 years.

How many doublings should we miss out on worrying about a 50% plunge, which does occasionally happen? (to be clear, the above returns include the bad periods as well as the good ones).

For S&P 500 total return, as well as bonds, and T-bills since the start of 1928:
http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/histretSP.html
/end edit

What really matters as far as risk is the risk of running out of money in retirement, and that risk is much higher for people who don't have any equities and only rely on "safe" fixed income investments, which don't even keep up with inflation. Innumerable historical simulations in innumerable studies have shown that. IOW its a bigger gamble not to be in the market. I don't wish to take that gamble.

My parents have done very well in their 4+ decades of investing, and I have done very well in my 4+ decades. In my case by mostly broadbased mutual funds. I don't attempt to pick individual stocks.

Yes, when an oligarch loses half their net worth, it doesn't affect their lifestyle at all
the remaining half of their wealth is more than they know what to do with.

When a regular person loses half their savings, it sometimes means they can't retire when they planned to. Or there's not enough money for higher education for the children. There's less of a buffer for emergencies or extended job loss as well.

Pension funds and insurance companies also have equity investments. When the market does poorly, pension funds have less to pay out in pensions, meaning pension reductions or running out sooner than they otherwise would. Insurance companies have to make up the difference through higher premiums.

Also, sustained stock market declines adversely affect consumer and business confidence, resulting in a reduction in spending with ripple effects throughout the economy, causing slowdowns, reduced hiring, and sometimes recessions, that affect all people, hurting those with the least the most.

The stock market is a leading indicator. All recessions that I've looked at began with a severe stock market downturn several months before the GDP and employment downturns began. Similarly, most or all economic recoveries were preceded by stock market upturns.

I'm assuming -- with full knowledge of ass-u-me -- that the Fed's raising of interest rates is what's spooked the markets. But if the Fed doesn't raise interest rates, doesn't that allow inflation to continue to rise, hurting the working folks far more than the uber rich?

Yes, and sadly yes. We are in a big suck time.

I'm very much hurt by inflation -- the purchasing power of my fixed annuity has declined well over 10% since inflation began rising in early 2021. What's more, unlike stocks, purchasing power will never recover. Historically, purchasing power is lost forever -- only a sustained period of serious deflation (prices overall dropping) over several years can bring that back, and that only happens in Great Depression scenarios that we obviously don't want.

Likewise my other fixed income investments (savings accounts, money market accounts, CD's, bonds, etc.) have likewise suffered a big and unrecoverable loss in purchasing power.

Thanks for the question

Edited to add January 5, 2023 since I've been referring to this in other threads, I want to include this as to why the stock market goes up for reasons other than being a manipulated casino or a Ponzi scheme -- so that it's all in one place --

This from Peter Lynch in 2001:

Since World War II, despite nine recessions and many other economic setbacks, corporate earnings are up 63 fold and the stock market is up 71 fold. Corporate profits per share have grown over 9% annually despite the down years. Nine percent may not sound like a lot but consider that it means that profits mathematically double every 8 years, quadruple every 16, are up 16 fold every 32 years, and are up 64 fold every 48 years."

Edited to add January 25, 2023 since I've been referring to this in other threads,

Nothing holds up as well in the face of withdrawals and inflation than does equities, except perhaps real estate. In other words, it's an even bigger gamble to not have a sizable proportion in equities.



Over the past 20 years, it has grown 6.3710 fold, an average annual increase of 9.7%/year

Over the past 50 years, it has grown 131 fold, an average annual increase of 10.2%/year

and so on.

This is from the below link, which also has similar for bonds, Treasury bills, and gold. These don't come close to matching the increase in equities.
http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/histretSP.html

[bucolic_frolic]

2. It tried to rally all day

Intel flopped, Walmart rallied a bit (I got out of a long there), but most things seem in the dump. Of particular note to me is ETF stock dividend funds continue to drop. The one general Europe fund I watch too. My take is you don't make bottoms on recent Fed action, nor on currency fluctuations, nor on mediocre volume.