Stock Market Recession or Correction?

[rdrr]

Trying not to get caught up in the latest FUD on the market, last time I did back during the covid downturn, I moved everything in my 401k to a cash investment and had I not done that. It took me awhile to invest it back into moderate to moderate aggressive positions, had I left it as is or not let it sit so long and reinvested during the bottom, I would have made up everything and then some by late 2022.

This one looks much worse, and I am trying to hold fast. However at 57 soon to be 58, I am a bit nervous about how this "correction" will impact my retirement plans. It sucks that there is so much premarket trading, and my 401k rebalances only execute at the end of the day (if the trade is made by 2PM that day).

 

[Nycturne]

To be honest, the advice I’ve seen is that you want to move to a less aggressive position at around 55 (if looking to retire at 65) specifically to insulate you against this kind of market shift too close to retirement. I’m not sure there is a good approach here other than either ride it out even if it delays retirement, or accept the damage and move to more conservative investments. There’s not much better than an educated guess in trying to figure out the specifics of this market drop and when it will recover. Sorry. If I were in your shoes, I’d ride it out and then move into something better protected after the recovery, IMO.

About the only good news is that the market fundamentals are okay, but there was a massive AI investment that isn’t yet paying off like claimed and it seems to be at least in part a reaction to that (so says my employer’s ~15% dip in the last month). So my guess is that this is more a correction, rather than something bigger. But who knows if this chain of "oversell new tech, pump stock, get corrected" will continue as we’ve seen companies go nuts at NFTs/Blockchain and VR/AR not that long ago.

If it makes you feel any better, I don’t think you can top my friend from college: panic selling their 401k after the start the 2008 recession during the low, and rebuying after the recovery was well underway. Our retirement plans today look very different because I rode it out (and tried to convince them to do the same), and they didn’t.

 

[rdrr]

To be honest, the advice I’ve seen is that you want to move to a less aggressive position at around 55 (if looking to retire at 65) specifically to insulate you against this kind of market shift too close to retirement. I’m not sure there is a good approach here other than either ride it out even if it delays retirement, or accept the damage and move to more conservative investments. There’s not much better than an educated guess in trying to figure out the specifics of this market drop and when it will recover. Sorry. If I were in your shoes, I’d ride it out and then move into something better protected after the recovery, IMO.

About the only good news is that the market fundamentals are okay, but there was a massive AI investment that isn’t yet paying off like claimed and it seems to be at least in part a reaction to that (so says my employer’s ~15% dip in the last month). So my guess is that this is more a correction, rather than something bigger. But who knows if this chain of "oversell new tech, pump stock, get corrected" will continue as we’ve seen companies go nuts at NFTs/Blockchain and VR/AR not that long ago.

If it makes you feel any better, I don’t think you can top my friend from college: panic selling their 401k after the start the 2008 recession during the low, and rebuying after the recovery was well underway. Our retirement plans today look very different because I rode it out (and tried to convince them to do the same), and they didn’t.

Yeah I only have myself to blame. Back story is that my divorce was finalized in Jan 2020... My agreement which I still feel was fair, was a 50/50 split of my 401k. The unforeseen issue was the amount in the agreement was set as of January 23rd 2020. The market tumbled during the pandemic and the QDRO distribution didn't actually happen until April/May 2020. So the distribution turned out to be nearly 60% of my portfolio (again not my Ex's fault). I have been trying to catch up since and probably picked a way too aggressive posture for my age. If I didn't have bad luck, I don't think I would have any...

Hopefully this bounces back, but with the state of the world and potential political unrest I am not so confident.

 

[Nycturne]

I have been trying to catch up since and probably picked a way too aggressive posture for my age. If I didn't have bad luck, I don't think I would have any...

Ouch. I hear the pain of that. I'll be honest, I'm at the point where I really should be reaching out to a financial consultant, as things are getting more complicated as I enter the second half of my career. Even at the large hourly rates, it'll probably have a muuuuch bigger impact down the road where I'm at currently.

Hopefully this bounces back, but with the state of the world and potential political unrest I am not so confident.

It depends. The economy's strength is linked to stability for sure, but the irony is that it matters less how the economy is managed, so long as it is stable. See China's economic strength despite being a one-party state with a lot of authoritarian leanings. So the risk to people who have investments is more related to the chaos of today's populist movements, rather than the authoritarian nature of them. And trying to outline the risks of that coming to pass is well above my pay grade, and would be a giant SWAG.

I do feel for folks staring down retirement right now due to all the uncertainty, and the US policy of making everyone have to manage an investment portfolio to save for retirement.

 

[Yoused]

I just learned about ^VIX, the volatility index that tracks price shifts in instruments. Yesterday, it had a massive spike, indicating that stock prices were fluctuating wildly. But it seems to have been just a spike and is trending downward, toward less instability. It looks like we saw a big correction but not much more than that.

^VIX, not surprisingly, is itself an instrument, which can be traded. You can, theoretically, make money off betting on the instability of the market. I have said for years that the markets are little more than big casinos, and this strengthens that opinion.

 

[rdrr]

I just learned about ^VIX, the volatility index that tracks price shifts in instruments. Yesterday, it had a massive spike, indicating that stock prices were fluctuating wildly. But it seems to have been just a spike and is trending downward, toward less instability. It looks like we saw a big correction but not much more than that.

^VIX, not surprisingly, is itself an instrument, which can be traded. You can, theoretically, make money off betting on the instability of the market. I have said for years that the markets are little more than big casinos, and this strengthens that opinion.

Yes, I learned about that yesterday as well, A.K.A. the panic v. greed index. Apparently my panic was a lot more than the markets, but this time I held fast and ignored all the headlines.

I wished that my retirement plans weren't tied to the NY "casino", but way back when I was 25 I bought into the idea of the 401k. They didn't tell me it was a fixed game.

 

[Citysnaps]

Nice to see the stock market turning around this morning.

 

[Nycturne]

I wished that my retirement plans weren't tied to the NY "casino", but way back when I was 25 I bought into the idea of the 401k. They didn't tell me it was a fixed game.

It doesn't help that there's a half dozen games being played at the same time at the same table. There's those trying to trade on the inherent fluctuations that happen during the day, and those trying to trade on the back of large scale economic growth, and everyone in-between. And then the assumption is that everyone should be expected to read the rules and know all the nuance involved with managing a 401k themselves, versus pensions that were managed by people with training and experience to do so.

A 401k is very much the latter type of stock investment though. Volatility generally should be ignored except when the threat is existential (i.e. an upheaval that changes what it means to own shares in a company), or when you are trying to plan your exit to less risky investments like you are. And if the threat is existential, I'm expecting I'm going to have a lot larger concerns than the balance in my 401k, IMO. The tech industry has skewed towards the "luxury goober" in the last ~decade, and I can see the job market getting very weird in the case of real upheaval.

 

[cbum]

My take: Overdue correction.

 

[Herdfan]

My take: Overdue correction.

Agreed. Moved about 40% into cash back in the spring. Didn't get the latest run up, but still way over where the year began.

I have always used options in my regular account. Sell covered calls and use that money to buy puts, some covering the more volatile stocks in my 401k.

 

[Yoused]

Here is a story about the "yen-carry-trade" strategery that seems to be a big part of this correction. Investors were borrowing Japanese ¥ for close to zero interest, using it to invest in low-to-moderate instruments and making a decent profit off the low cost of the loan. Then, the ¥ rose against the $, Japanese interest rates inched up, and a whole lot of cunning investors found themselves faced with those troublesome margin calls.

 

[Citysnaps]

Tech’s looking good this morning.