Dow Jones dips by 666 points to cap off worst week in 2 years, sign of end times?

[Archbob]

So, the Dow Jones Industrial average dipped by 666 points to cap off its worst week in 2 years. This also comes right on the heels of Trump's State of the Union Address.

Does this mean the end times are upon us and Trump is the herald of destruction and stupidity?

 

[Birdjaguar]

No. It is likely just taking a breather. Or, it might be the start of an anticipated 10% or so decline that happens during off presidential year elections. Such a decline has happened in all 14 mid term elections since 1962. The probabilities are high for one this year.

 

[Zkribbler]

Birdjaguar is probably right. The Obama boom has been going on and on, like the Energizer bunny. It's overdue for a correction.

On the other hand, Trump is funding his tax giveaway with borrowed money. This will have to be paid back someday, which bodes ill for the future. Moreover, he's pouring money into an economy which is at full employment, which means inflation's on the way. Plus, he slashing environmental regulations, which means more pollution, with it's drag on the economy. He's slashing health care, which means more sick workers. So there's plenty of bad news in the future, but I think it's too early for the market to be reacting to these things yet.

 

[Hygro]

On the other hand, Trump is funding his tax giveaway with borrowed money. This will have to be paid back someday

Maybe in a roundabout economic way but not in the direct financial this implies.

Basically this means higher interest rates and/or an inflation spike, with an increase in total treasuries owned and traded by financial industry. More advantages to the banking sector can weigh on the rest of us in the form of their improved position to seek rents which is how we pay for that outcome....

None of which means having to run a long term surplus equal to outstanding treasuries. That’ll tank an economy.

 

[ls612]

I took the opportunity to buy more stock, as I strongly doubt that this correction will linger for very long. Ultimately as long as companies continue to post earnings growth (and with the tax bill that seems to be likely in the near future) and the US economy continues to grow at 2.5-3% the markets will continue to rise.

 

[Birdjaguar]

Yeah unless Trump gets us in war or we have serious inflation, I think the market will push higher for a bit. Also, I wouldn't rule out impeachment or indictment of Trump as market downers.

 

[Snerk]

A ~10% decline is in many ways a preferred scenario now. The growth has been unnaturally long and will most likely result on an ugly crash in if continues for much longer.

 

[Zkribbler]

I wouldn't rule out impeachment or indictment of Trump as market downers.

True. The market hates uncertainty.

 

[Timsup2nothin]

Yeah unless Trump gets us in war or we have serious inflation, I think the market will push higher for a bit. Also, I wouldn't rule out impeachment or indictment of Trump as market downers.

True. The market hates uncertainty.

I think this is the main drive for the current dip. It is getting very hard for business to ignore the increasingly desperate appearances from the white house and the Republican congress. I'm not thinking anyone really expects impeachment or indictment, but having two thirds of the public believing the only thing keeping impeachment or indictment away is obvious chicanery really unsettles the environment.

 

[Hygro]

A ~10% decline is in many ways a preferred scenario now. The growth has been unnaturally long and will most likely result on an ugly crash in if continues for much longer.

How is the growth unnaturally long?

 

[Snerk]

How is the growth unnaturally long?

The growth we've seen from around 2012 when the markets recovered from the housing crash in 08 is very rare in terms of length and consistent growth rate. The markets can't simply grow forever reaching new heights each year as they have over the last few years. It's an unsustainable growth. What goes up must come down. A period of no growth or slow decline is much preferred over a bursting bubble. But the how and when is anybody's guess. The current dip might be temporary and the growth can continue for another few years. But it's increasingly unlikely. A scenario is approaching that has several parallels to the years leading up to the 2008 crash.

 

[Birdjaguar]

This bull market is 106 months long. It began March 9, 2009. The S&P 500 has gone from its housing crash low of 676 to over 2800 and produced a return of 297% (including dividends).

 

[Birdjaguar]

I heard today that in the most recent employment/wage report (last Friday) supervisor and manager wages to a big jump up. For investors such a move is inflationary and that spooked the market.

National unemployment rates:
5.4% No HS diploma
4.5% HS diploma
2.1% 4 year degree

 

[Hygro]

The growth we've seen from around 2012 when the markets recovered from the housing crash in 08 is very rare in terms of length and consistent growth rate. The markets can't simply grow forever reaching new heights each year as they have over the last few years. It's an unsustainable growth. What goes up must come down. A period of no growth or slow decline is much preferred over a bursting bubble. But the how and when is anybody's guess. The current dip might be temporary and the growth can continue for another few years. But it's increasingly unlikely. A scenario is approaching that has several parallels to the years leading up to the 2008 crash.

What's a normal (not very rare?) consistent growth rate? How long and what percent per year?
What allows for new market heights and why should a market return to old prices?
What makes it unsustainable? How much of it can't be sustained?
How far does this magic of "what must go up must come down" statement apply?
Why is slow growth/decline better than fast growth that recedes?

 

[onejayhawk]

Driull, drill, drill Buy, buy, buy.

J

 

[Timsup2nothin]

Driull, drill, drill Buy, buy, buy.

J

Absolutely. I'm opting for real estate in Belize.

 

[Snerk]

What's a normal (not very rare?) consistent growth rate? How long and what percent per year?
What allows for new market heights and why should a market return to old prices?
What makes it unsustainable? How much of it can't be sustained?
How far does this magic of "what must go up must come down" statement apply?
Why is slow growth/decline better than fast growth that recedes?

That's a lot of questions guy. The ones on statistical developments of markets should be perfectly googlable.
Regarding sustainability there's not an exact threshold, just various queues of over extension. Ask your local economist.
History shows that "the what goes up must come down" applies to a great extent. If you want an exact number of how far I'd say 42.23, give or take 3.45. 88.98 if we're using Swedish numbers.
A slow decline is better than a major crash because of less panic and less domino effects. Though some people always profits a lot from crashes, bubbles or crisis too.

 

[Angst]

What I'm amused over is how Trumpets cite the great state of the stocks as due to the orange.

Not in regards to this dip, I understand that it's temporary. In regards to this whole ordeal being an Obama boom...

 

[Gori the Grey]

Does this mean the end times are upon us and Trump is the herald of destruction and stupidity?

Yes, Trump is the herald of destruction and stupidity, but it's not because the Dow dropped by 666 points.

It's just because he is.

 

[El_Machinae]

What's a normal (not very rare?) consistent growth rate? How long and what percent per year?

Normal growth is a function of our real growth and our savings rate. Rates faster than that are not sustainable, because they're not real. As you know, you cannot literally 'save' future production, you can merely assign ownership of future production.

What allows for new market heights and why should a market return to old prices?

Animal spirits and market tightness. Markets don't need to 'return to old prices', but they will oscillate around real prices.

Why is slow growth/decline better than fast growth that recedes?

I snipped a couple, but I assume you're actually asking about whether large oscillations are worse than shallow ones. They are, for two reasons. The main reason is that large oscillations encourage of wealth transfers upwards, people who need the liquid cash soon are selling assets to those who don't. The more patient (and more informed) are gaining wealth from those who already have a relative disadvantage.

The second issue is that there are more victims of large oscillations. There are stronger odds that a desperate person will sell at a loss, because they either need the money or more greatly perceive the pain of additional (future) loss.