Quote:
Originally Posted by Tyga11
I imagine a lot of posters in here missed on the rally...
|
Missed? No, but I got
some participation and have shored up my mid-/long-term bond positions. Never out of the market, and have owned NVDA for quite some time. Likewise MSFT, QQQ, SPY and some others. I've actually added a few new positions, as well. And I have a fair chunk of stock in the company that I've worked for the last 17 years, and it's up 37% this year. That does not suck. Overall up a bit more than the S&P, which given the level of risk I've assumed is quite satisfying.
But, I have been and remain defensive, in part because I'm getting close to retiring and have to engage in wealth preservation to an extent. The good news is that cash is a great alternative (finally) and I've bought up some 2-/5-/10-year Treasuries that are yeilding between 4-5%. That's a pretty safe place to put 20-30% of a portfolio and get decent yield when you're retiring in a couple of years.
Why remain defensive? Well, below is a chart that I lifted from an article on consumers' declining balance sheets from the WaPo this morning. It shows an obvious trend from the I-got-my-gov'mint-money highs of early 2021. The red line is mine; I wanted to extrapolate to see where we'll likely cross the y-axis. Considering that 70% of our economy is consumer spending this both explains why we haven't had a recession yet, and when we might get one. Consumer credit is already at all-time highs and delinquencies are increasing, so Plan B looks a little shaky. Job losses are going up, even in the service sector, and hours worked are going down. It's hard for me to see how we do not have an earnings recession coming, and that is not going to be good for the markets, since it doesn't seem to be priced in at this point.
Most importantly, inflation remains sticky (4.8% core PCE this month) and wage growth alone is driving 2% of the overall rate. It's hard to imagine how we get to 2% inflation in that environment, and I continue to believe that the Fed won't quit until we get unemployment up by 1-2%, which is what it's going to take to quell that wage inflation. Unfotrunately, growth will fall first, and we'll likely end up with a not-insignificant period of stagflation before we reach that 2-ish% inflation number. I say 2-ish b/c the pressure on the Fed to give up and start cutting rates when growth slows is going to be tremendous, especially in an election year, so they'll likely at some point say that 2-3% is "good enough", at least for now. But, trust me, we do not want
stagflation.