What caught my eye this week.
Donald Trump’s antics finally tipped the US stock market into a correction [1] this week, defined here as a 10% fall from the highs in the S&P 500.
The median US stock did even worse, posting a 20% decline.
According to Bloomberg [2], this 16-session losing streak was the seventh-fastest such plunge since 1929.
However the US market bounced on Friday. And personally, I’m seeing few signs of real panic.
Indeed why should there be? Investors de-rating US shares by a modest 10% to reflect the wildly unpredictable Washington mob ripping up the rulebook seems reasonable to me.
Besides, anyone who’s been invested in US equities for a while should still have some very fat gains to bolster their nerves.
Bear necessities
On that note: have we forgotten [3] what a proper bear market feels like?
The Covid crash was a shock [4] but short-lived – and there was lots else going on to distract us.
The 2022 growth stock rout largely passed UK investors by. The weaker pound that year boosted global portfolios in Sterling terms and the biggest shares soon recovered.
Most of you probably don’t even remember 2018’s ‘taper tantrum’.
It’s been a while since investors really got the willies [5].
You’ll be fearful when others are fearful
I even read in the Monevator comments this week a suggestion from a smart and well-regarded reader that one could avoid volatile and arguably expensive markets now, and then after a crash buy leveraged ETFs to doubly profit on the bounce.
Now each to their own and I’m all for creative thinking, but this sounds to me like bull market fatigue speaking.
We’ve had it too good for too long, maybe? Bridgewater says [6] the most recent 15-year stretch for US stocks was the best since 1970…
[7]…so I’m here to remind you that in a proper bear market [8], people aren’t thinking about piling into two- or three-times levered ETFs to earn outsized returns in some undated recovery.
They’re wondering if they’ll ever get their money back at all.
Or they’re feeling guilty [9] about their gran who gave them £1,000 when they went to university which she saved by going without for years, and which they just vapourised in five minutes playing Gordon Gecko in the midst of a global meltdown. (Been there, got that T-shirt [10].)
They’re saying never again [11].
In a proper bear market it’s hard enough just to not sell [12] and to get through [4] the terrible daily news.
And when the bottom [13] does come, few people will be listening, believe it, or even care.
Survival is the name of the game [14] in bear markets. If you must try to market time [15] your way through one, I’d say keep it as simple as possible and keep gearing at bay with a barge pole.
Leveraged ETFs [16] are for bull runs and for risk-takers who really know what they’re doing. Most of us should just keep on keeping on [17].
Have a great weekend!
From Monevator
No Cat Food retirement portfolio Year 2: Withdrawals are go – Monevator [18] [Members [19]]
Hetty Green and the timeless appeal of market timing – Monevator [15]
From the archive-ator: Asset allocation rules of thumb – Monevator [20]
News
Note: Some links are Google search results – in PC/desktop view click through to read the article. Try privacy/incognito mode to avoid cookies. Consider subscribing to sites you visit a lot.
UK economy shrank unexpectedly in January – BBC [21]
Housing market losing momentum says RICS – Property Wire [22]
What will be in the chancellor’s Spring Statement? – BBC [23]
No cash ISA shake-up apparently, but Reeves still pondering cuts – Guardian [24]
Poorest Britons now poorer than the poorest in Slovenia and Malta – NIESR [25]
Secret millionaire pensioner, 98, leaves £1.4m to community – Yahoo News [26]
Toy train maker Hornby to quit the London Stock Exchange – Morningstar [27]
FCA abandons plans to ‘name and shame’ firms under investigation – This Is Money [28]
[29]
Why the government is seeking to cut the benefits bill – Guardian [30]
Products and services
Fixed mortgage rates take their biggest fall in six months… – What Mortgage [31]
…and the lenders offering sub-4% fixed mortgage rates – Yahoo Finance [32]
Get up to £4,000 when you transfer your ISA to InvestEngine our link [33]. (Minimum deposit of £100, other T&Cs apply. Capital at risk) – InvestEngine [33]
Natwest launches £150 cash bonus switch offer – Be Clever With Your Cash [34]
Price gap between flats and houses hits 30-year high – Which [35]
Luxury lounges: credit card perks “we are all paying for” – BBC [36]
You can get up to £3,000 cashback when you transfer your pension to Interactive Investor [37]. Terms and fees apply. – Interactive Investor [37]
Have you got your Monevator mug yet? – Monevator Shop [10]
Care home costs rise to £1,400 a week – Which [38]
Homes for sale in urban villages, in pictures – Guardian [39]
Comment and opinion
The importance of temporal diversification – Cullen Roche [40]
How the pension freedom ‘class of 2015’ [maybe] doubled their money – T.I.M. [41]
Never root for a recession – Of Dollars and Data [42]
Are US tariffs on goods a prelude to tariffs on money? [Search result] – FT [43]
The dirt tells no lies – Fortunes & Frictions [44]
The colossal tax raid that explains why high earners don’t feel rich – This Is Money [45]
Trump trades and European exceptionalism – Behavioural Investment [46]
A two-tier housing market will result from half-baked leasehold reforms – Guardian [47]
Should you ‘reset’ retirement withdrawals in a bad market? – Best Interest [48]
How to use commodities in your portfolio [US but relevant] – Morningstar [49]
Is a Lifetime ISA or a SIPP best for retirement saving? – Which [50]
How the gold bullion boom sent a US recession alarm blaring [Nerdy] – FT [51]
Naughty corner: Active antics
Better angels – Humble Dollar [52]
The Squid Game stock market – Acadian [53]
Charting: value or voodoo? – Larry’s Substack [54]
The risks to equities are tailwinds to infrastructure – Institutional Investor [55]
In geopolitics, words speak louder than actions – Klement on Investing [56]
Stock-picking in volatile environments – Albert Bridge Capital [57]
Hedge funds paying up to £1m for weather modellers – Bloomberg via Yahoo [58]
Kindle book bargains
Poor Charlie’s Almanack by Charlie Munger – £0.99 on Kindle [59]
How to Run Britain by Robert Peston and Kishan Koria – £0.99 on Kindle [60]
Invisible Women by Caroline Criado Perez – £0.99 on Kindle [61]
Chip War by Chris Miller – £1.99 on Kindle [62]
Environmental factors
The great British sewer dump – Reuters [63]
Scientists learn how migrating baleen whales transport nutrients globally… – Nature [64]
…but why are more of them getting tangled up in ropes? – BBC [65]
The Chinese project that led the way in water and soil conservation – Guardian [66]
How plants are responding to a warming world – MIT Press Reader [67]
Supertrawlers spent 7,380 hours fishing in UK protected waters – The Grocer [68]
Robot overlord roundup
Read a story from OpenAI’s new creative writing model – Guardian [69]
Robotaxis are here – Unchartered Territories [70]
AI means the end of the web as we know it – Spyglass [71]
Who needs revenue when you’re a multibillion dollar AI startup? [Search result] – FT [72]
Not at the dinner table
‘Knowingness’ and the politics of ignorance – The Garden of Forking Paths [73]
The new global divide makes Brexit an anomaly – Chris Grey [74]
EU defence fund to be spent on European weapons – Semafor [75]
How much do I really need to know? – Kottke [76]
Trump boom versus tariff doom – Faster, Please [77]
The real problem with tariffs – The Edgy Optimist [78]
Short-term pain for…long-term malaise? – Drezner’s World [79]
Why America betrayed Europe – Noahpinion [80]
Off our beat
Rembrandt to Picasso: Five ways to spot a fake masterpiece – BBC [81]
Woman who lived to 117 had genes keeping her cells ‘younger’ – Guardian [82]
How to learn a language like a baby – The Conversation [83]
Top ten Scandi life lessons after a decade living in Denmark – Guardian [84]
Pure independence [A couple of weeks old] – Morgan Housel [85]
And finally…
“There is a limit to how much you can cut but there is no limit to how much you can earn.”
– Ramit Sethi, I Will Teach You To Be Rich [86]
Like these links? Subscribe [87] to get them every Saturday. Note this article includes affiliate links, such as from Amazon [88] and Interactive Investor [89].