Tag Archives: Work

Thoughts on Market Cycles and Volatility

I’m an arm-chair voodoo economist.  I care about what happens in the US Equities Markets because I have a 401k and an IRA, which are closely tied to US Stock Market performance, and because I’d really like to ‘retire’ one day and be self-sufficient. I only participate in my company’s 401k because I get ‘free’ money from a Company Match, but beyond that, I’m trying to save my money in cash right now because I think things are fixin’ to get bad.

I would dearly love to be able to predict the future performance of US Equity Markets so I would know how best to deploy my cash to take advantage of market swings. But since I can’t predict market swings, the next best thing is to make an educated guess about it’s future performance. I think it’s best to try to understand the macro economic drivers as well as micro economic ones in trying to anticipate big problems ahead. Here’s what I think is happening now, and in the near future, based on what I’ve read, seen and heard lately:

  • We are nearing the end of another economic bull market. When that bull market started exactly is unclear, but let’s say it started at the end of the last market crash, in 2008. Depending on who you subscribe to, market cycles can last any where from 6-10 years. Well, it’s 2018 y’all.
  • The US Job Market never really recovered from the crash of 2001. In the late 90’s there were technology startups everywhere in the Washington DC area. Prior to 2008 there were still technology startups to be found, but after that they have largely disappeared. There are, however, plenty of Government and Government Contractor jobs to be found. Do these types of jobs really contribute to GDP and US innovation?  Oh yeah, then there’s Amazon, Facebook, Google, and Apple.  Federal Debt continues to sky-rocket and there is an ever-present specter of Government Shutdowns from CR to CR.  In sum, I’m very worried about our economic future.
  • The Bureau of Labor and Statistics (BLS) claims unemployment is currently down in the low 4% range.  Maybe that’s true, but that does not speak to the quality of jobs available out there, nor does it address the downward pressure on salary growth that employees currently face, nor the lack of job mobility.  It’s still an Employer Market, as it has been for the last 17 years or so.  In 1998, it was definitely an Employee Market and it seemed everyone was making money.  It’s too bad we could not preserve the status quo then.
  • The Federal Reserve, I think, is desperate to move interest rates higher because it does not have much room right now to address large concerns in the US Economy should a market crash happen.  I do not believe interest rate hikes are the result of a healthier US economy.  If the Fed can’t save us from Market Crashes through their never-ending tweaking of interest rates, then it is simply not able to justify it’s existence.  But there’s always the ‘Nuke North Korea’ ace-in-the-hole should America need a real distraction from economics at home.

Money is power. We need to follow the money and control it or it will control us.

Here’s a really good book I just read on this topic: https://www.amazon.com/Rich-Dads-Prophecy-Biggest-Yourself-ebook/dp/B0175P5M6O