Is the “Stock Market is in Trouble” narrative BS?

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by cbus20122

I was looking at the moving average for the ‘max’ on Yahoo finance. No massive crash in 2018. Not even an indicator of what in the past looks like a correction.

We already have gone through a “correction” based on most common definitions of a “correction”.

Is the “Stock Market is in Trouble” narrative BS?

Answering the title of your post, I think this depends on people’s definitions of things and what that actual narrative is. Truth be told, almost every bearish post in here will get the same responses. EG, “people have been calling for a crash for the past 3 years”, or “people have been predicting a crash since 2008”.

Clearly we do get occasional or almost daily low effort “market gon’ crash” type posts in here, but I would argue that there is a much larger permabull population here than anything else. Anyone bearish tends to get downvoted and pushed out of here with simplified cliche’d answers.

Even looking at the YTD moving average things don’t look alarming.

If it did look alarming, especially with a moving average, we would already be in a bear market. People are posting about potential bear markets because it’s only useful if you identify them in advance. Nobody made money calling a bear market 6 months after we’re in a recession.

When the market takes a few hundred point hit and it’s a slow news day does the media decide to create panic for clicks?

Yep, financial media, or rather, media in general feeds on bad news. IE, if it bleeds, it leads. Fear sells more clicks than good news, so CNBC and the like tend to over-report and sensationalize. But it’s important to distinguish the actual news from the headlines. Just because news agencies sensationalize things doesn’t necessarily mean that the underlying story isn’t true.

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Lets look Forward for a Second

I lean neutral on US markets right now, and will be more bearish going into the winter. Obviously people are free to have their own opinions, but I’ll ask a few basic questions.

  1. Do you think YOY earnings growth comps will continue to set new records? We’re already in one of the longest periods of earnings growth expansion ever, and comps get more difficult when comparing to high previous bars.
  2. If yes, do you believe higher commodity costs, higher wage costs, and higher debt service costs will not affect earnings?
  3. If yes, do you believe higher currency costs abroad (rising dollar), and slowing industrial growth will not affect international profits?
  4. If yes, do you believe that tightening liquidity and credit conditions will have no affect on business’s access to funding?
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Given, I fully realize the above is making a few modest assumptions, but most of these assumptions are based on trends that are currently taking place. The main point here is that we are transitioning from an environment in which there was nothing but tailwinds (2016-2017) into an environment where the only thing that businesses face are headwinds, and this all is occurring amidst a lot of other geopolitical and economic concerns which do have some legitimacy.

While low effort posts calling for a market crash are generally silly since they often come from a point of not understanding much, I think it’s a bit naive to call general market weakness “narrative bs”. If anything, now is probably a better time to be adding some hedges to a portfolio and shifting into less risky assets while the market is still doing well enough, but history tends to show that market tops typically coincide with the very opposite behavior.

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