Forum Topics Macro Outlook
Bear77
Added a month ago

23-March-2025: Interesting little piece by Marcus Padley in his Saturday email (yesterday, March 22nd), titled "Man in the moon", but with an image of a man (or woman) ON the moon rather than in it. Pfft. Semantics.

Market Summary - Uncertainty is the enemy at the moment - nothing has gone wrong in the numbers, growth hasn't slowed, inflation hasn't picked up, but one thing is clear - the stock market, the Fed, the world, is trying to come to terms, to price, policy uncertainty under Trump. It is hard because he is seemingly making things up as he goes along. What we see is, I think, what we are getting. Policy on the run, thoughts that manifest themselves in policy and policy changes without structure, research or a master plan. The result is volatility, and the catchword of the week (thanks to the Fed), is "Elevated uncertainty", and that is why the stock market is down 10% and nervous.

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THE MAN IN THE MOON

It's an opportunity - It is wasted effort to get frustrated by Trump and the uncertainty he has created. Instead, you have one job. Exploit Trump. Exploit any market weakness created by his impact. Be the Man in the Moon. Looking down on the situation. Objective. Unemotional. Logical. Spock. Celebrate Trump. Celebrate the uncertainty. Trump is going to provide us with some fabulous buying opportunities, and the debate for us at the moment is whether that opportunity is already here, or not. With the uncertainty of April 2 ahead of us (reciprocal tariffs detail), the answer is still "not yet". But be ready to change your mind at next utterance. 

No one knows - Anyone predicting anything at the moment is guessing. The future of the stock market in the short term is unknown. No one knows, and any commentator, economist, strategist or adviser who is laying down a firm view is being reckless, they cannot know. But that's OK. Whilst we are kept guessing I think we're doing the right thing, not leaping at first drop and sitting in cash. And we'll remain in cash for now. Until something persuades us that the balance of probability is on the market going up again. At the moment, it is quite literally 50-50. We are "stuck in the box". Caught in the crosswinds of doubt. Waiting for the break. And whether we chase the next break or not will depend on the day. We don't know. No-one does. What I do know is that in the grip of uncertainty, any certainty (on tariffs) will be good for the stock market - good or bad.

--- end of excerpt ---

Source: https://marcustoday.com.au/member/webpages/80_view-report.php?guid=f295295e259aad47665e4d17a5a43c8c


Not sure if anything there is actionable TBH. Certainty?! Not this year!

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mikebrisy
Added a month ago

US Economy - This Isn't Looking Good

Mohamed El-Erian, an economist who I follow and who I find always explains things clearly, has posted the following 4 charts on X. Bit of a worry!

What I notice is the magnitude of the changes on all graphs over the last couple of weeks.


"From Torsten Slok, Apollo's Chief Economist:

•"[US] Consumer sentiment is declining rapidly both for households making more than $100,000 and less than $100,000 (see the first chart).

•Consumer worries about losing their jobs are at levels normally seen during recessions (see the second chart).

•A record-high share of consumers think business conditions are worsening (see the third chart).

•Households’ income expectations are declining (see the fourth chart).

•Inflation expectations are rising at an unprecedented speed (see the fifth chart).

The bottom line is that consumer sentiment is deteriorating at an alarming rate."


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Strawman
Added 2 months ago

Well, it's not every day you see the NASDAQ drop 4% in a single session. Now down ~10% over the past three weeks, but a deeper dive shows some massive individual declines.

Tesla is perhaps the most striking example -- not only did it lose 15% last night, but it's now down ~55% from its December high. It’s trading like a penny stock.

Meanwhile, here are the declines from recent highs for some major names:

NVIDIA: down 31%

Alphabet, Meta, Amazon, Microsoft: all down ~20%

Even the Dow Jones is off 20% this year

Against this backdrop, Bitcoin’s ~25% pullback hardly seems remarkable. Given its historical volatility, it actually looks resilient.

But here’s what might be an even bigger deal: Japanese bond yields have spiked to GFC levels -- a development that equity markets seem to be underestimating. Japan is a major lender to the world, and higher domestic yields incentivise Japanese investors to re-shore capital, impacting global bond yields, FX rates, and overall liquidity.

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Meanwhile, China is dealing with deflation, a collapsing property sector, demographic decline, unsustainable debt and rising trade tensions. (Prices have fallen for two years, marking the longest deflationary period since the 1960s). Deep structural imbalances between investment and consumption remain unresolved and foreign investment has also plummeted.

Trump and his tariffs are wreaking havoc (who would’ve guessed?), as are related policies like DOGE. Geopolitics is about as bearish as you can get, short of outright war.

A big part of the problem, to my mind, is debt - or rather, how it stacks up against global productive capacity.

Global debt hit a record $323 trillion in 2024, pushing the global debt-to-GDP ratio to 326%. Governments alone owe over $100 trillion, or ~93% of global GDP.

This debt isn't being repaid (it never will be) -- it’s being rolled over. And with bond yields spiking, the cost of doing so is rising sharply.

The market is simply being rational. Higher risk demands higher yields. But if the free market can’t absorb this debt at yields governments find acceptable (it can’t), the buyers of last resort (central banks) will step in, as they always do. And that, ultimately, is just money printing.

The powers that be will talk tough but inevitably fold...just as they always do. Stagflation seems like its a decent chance over the coming years, but who really knows?

Still, the world will keep turning. There will always be assets with genuine value that serve as lifeboats against debasement and economic stagnation. And when the liquidity taps are turned back on, we’re likely to see asset inflation take off again -- or, at the very least, cushion the contraction.

Stay solvent, avoid leverage, focus on quality.

51

Arizona
Added 2 months ago

Thanks @Strawman for your take on the macro situation. Good stuff.

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DrPete
Added 2 months ago

Bring it in Andrew . . . someone needs a hug

21

Solvetheriddle
Added 2 months ago

No big surprise, Trump brings volatility, as you say SM stay in quality is the best strategy to survive. sentiment is in the toilet now, should you sell? i have no idea but we have been saying for a while to stay liquid and quality after two very strong years.

IMO the US large caps are now approaching some LT valuation support, up by the stairs and down by the elevator. i will be looking to add over time. As for TSLA BTC PLTR you are on your own. Shouldn't you be comparing BTC to gold SM? I'm just kidding compare it to whatever you want, lol ive got no idea what BTC is worth.


as a PS, when i mean quality i don't mean 3DP et al, like someone suggested last time i mentioned it in the last downturn!!!

29

edgescape
Added 2 months ago

I'm still trying to see if AMZN or CSL is a better buy in this situation

Both have operations and foreign income out of the US which is a win when the USD falls.

Anyone else have thoughts on this?

18

BkrDzn
Added 2 months ago

If you think that global markets are often driven by liquidity flows in the short term then Japanese yields going parabolic is likely the key driver of the correction. Low yields that were managed against a global backdrop of higher rates drove an epic carry trade which now would likely be reversing, sucking liquidity with it.

27

Strawman
Added 2 months ago

haha @DrPete -- honestly, I'm not worried in the slightest. Genuinely!

I know what i own, and why I own it.

I have my health, a loving family.. i feel like the richest guy on Earth. Of course, like everyone, it's not all rainbows and lollipops, but I cant really complain.

Also, this is not my first rodeo. I have invested through the dot com crash, the GFC and covid, along with myriad other economic and financial hiccups. The regret is always never being bold enough. Fear is an anathema to long-term returns!

As for the BTC comparison to gold @Solvetheriddle -- that is a far, FAR better comparison to equities, but for now the majority of the world still sees it as a "risk asset". And, given that, it really is amazing how well it has held up. (It hasn't yet been mentioned here, and much of the media has somehow ignored it, but this week the US established a Strategic reserve, with a plan to acquire more through budget neutral measures. Kind of surreal..)

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Solvetheriddle
Added 2 months ago

just to get you excited SM, i saw a talking head who predicts that if the US equalises BTC to gold holdings in its reserve, it goes to $2m....you heard it here first!!!, i know there is no way you are off that train.

25

DrPete
Added 2 months ago

@edgescape, unless you're a trader, I'd take "in this situation" out of your question. Macro and micro are only weakly correlated. For some, I can see how macro may slightly influence overarching asset allocation - in particular, lowering debt in challenging times (but even this decision needs to be taken early, before everyone is rushing for cash; better just never to play with debt to the extend it can threaten liquidity).

I think trying to factor macro into a decision between investing in behemoths like Amazon and CSL may be trying to finesse the decision too much. Both companies are long term plays with intrinsic valuation that will wash through macro cycles.

Predicting macro is near impossible. Might be worse tomorrow. Might be better. Trump could go quiet tariffs. Musk gets bored and decides he better focus on being a CEO again. Europe is talking about big increases in spending on defence and infrastructure. Japanese yields may be increasing, but US yields have just dropped. Lower central bank rates and oil prices might soften the dip. Macro is a massive engine with complex positive and negative feedback loops. Just too hard to predict.

Root our decisions in fundamental value. Build and lean upon conviction. Stay liquid. Eternal guideposts.

27

thunderhead
Added 2 months ago

Thank you Andrew and others for weighing in.

The price action skews bearish, and it could certainly get a lot worse until it gets better - indexes as well as key individual securities (including some of the ones mentioned in this thread) have lost important technical support levels.

We're certainly due for a call from the bear after all the fat largesse in 2023 and 2024 with limited drawdowns.

22

mikebrisy
Added 2 months ago

@thunderhead agree. Market was looking for an excuse for a pullback and Trump has given it several.

Personally, these are the times when I take out my shopping list and cash reserve and look for opportunities to add quality names.

38

thunderhead
Added 2 months ago

That's the way to go @mikebrisy.

12

BigStrawbs70
Added 2 months ago

Great post as always @Strawman

Times like these, the Buffett quotes around the falling tide, dangers of leverage, and not wanting to start again ring louder and clearer. It also reinforces how powerful the concept of regular investing via dollar-cost averaging is.

I will continue to add each month to the NASDAQ, Bitcoin, Berkshire, and Soul Patts – probably not so much into my other holdings (note: the first 4 make up the vast majority of my portfolio). No guarantees in investing, obviously, but... I am confident that in, say, 5 years' time, I will only wish I had held more of those 4 regardless of what their prices do in the coming months.

25

DVV1974
Added 2 months ago

Once the bottom has been hit, the only way is up!

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15

Wini
Added 2 months ago

Price drives narrative. 6 weeks ago Trump tariffs were bullish for the US economy. Their GDP per capita growth was an global outlier and the USD dollar strength was unstoppable. 6 weeks later and Trump tariffs are spiralling the US economy headfirst into an unavoidable recession. GDP is quickly being revised lower and the USD is sliding as investment dollars are being re-shored.

No view on either scenario, just always find it interesting how the the interpretation of the macroeconomic environment often relies on what the price action is doing.

44

Strawman
Added 2 months ago

So true @Wini!

It’s a reminder that while macro is important, it’s often more of a justifying mechanism than a predictive tool. Narrative shifts usually tell us more about the prevailing mood than the actual impact of a policy.

A useful mental check: when a new narrative emerges, ask whether the facts have actually changed or if sentiment is just catching up to price action.

30

mikebrisy
Added 2 months ago

@Wini so true. For example, only a few weeks ago the big brains at GS were talking up US exceptionalism and the US equities story, and now, on the back of the recent headlines in a "Should we buy the dip" podcast, the answer was "No", Europe is the place to go - growth focus, defence industries, coming off cyclical lows blah blah....

I think that, as a long term investor where I try to keep my horizon out 3 to 5 years (minimum) in terms of thesis development, it is important to realise that so many in the market are churning their portfolios according to the narrative of the day, and the IB are measuring their quarterly and annual "returns" - coz that's how they earn their bonuses. The narratives are all in service of this short term churn and nothing about compounding and holding quality businesses over time.

I think of volatility as my friend. In the quality part of my RL portfolio, I've recently (including today) been buying $BRG, $RMD, $WTC, and today I even succumbed to getting back into to $TNE which has dipped below my central case valuation of $27.00 (I know, I need to update my SM valuation.)

I'm not trying to time the market, or call the bottom or anything like that. There's no "Story" behind what I am doing. The market is just giving me the opportunity to by quality stocks that I know well, below my valuations. For the last 6 months I've been sitting on an unhealthy cash surplus in RL, and history says that if ever you choose to buy, then doing it when things have pulled back a fair bit is not a bad thing, if you are prepared to judge success over the longer term.

36

Strawman
Added 2 months ago

Oodles of wisdom there @mikebrisy

For the record, I've been macro bearish since.. *checks notes*.. forever! Thankfully I've remained fully invested though.

What else do you do with long term savings? Cash!? Pfft hahaha

24

Jarrahman
Added 2 months ago

Thank you all for your contributions. I've been reflecting through the last few weeks on the clear shift in sentiment and my actions have been turning off most of the news. My RL portfolio has been hit, but it's majority is in broader index and larger companies which have good business structures, etc.

I really wish I had some surplus cash to buy more at the moment, but I'm fully deployed and am recently on a single income with my wife on mat leave...

21

mikebrisy
Added 2 months ago

@Strawman I know I am well and truly infected with the investment bug.

Recently I thought about upgrading my car,... but then I thought about the opportunity cost versus keeping the money invested.

Wife: "But you can't take it with you ( i.e., when you die)

Mikebrisy: [Glazed over look, staring into the distance ,... manic smile]

33

Ipsum
Added 2 months ago

I listened to a podcast dicsussion with some pro-Trump investors this week. All of them agree that Trump was "delivering what he promised" with his trade tariffs. Yet none of the agreed on what the goal of the tariffs were, much less the strategy behind repeatedly announcing and delaying them. Trade protectionism? Illiegal immigration? Fentanyl? Or just revenue raising? It's all, none, or some, depending on the day of the week.

The result in uncertainty. I'm expecting more volatility for the time being. I've trimmed a few positions to prepare for this. I'm not worried as such, but I think there will be opportunities to buy high quality companies and I want to be ready to take advantage of them.


22

thunderhead
Added 2 months ago

If you can believe the words coming out of their mouth, both Drumpf and his Treasury Secretary have indicated that they are going to "rebalance" the US economy towards Main Street v/s Wall Street, and they are prepared for the economy to "roll" in the meantime.

That just translates to more volatility and uncertainty till the market finds a new "equilibrium", or if they throw in the towel and revert to the typical skew to Wall Street i.e. the pain becomes too unbearable.

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tomsmithidg
Added 2 months ago

Hey @mikebrisy , a car can be an investment. Look at Rowan Atkinson's McLaren, he bought it for about $1.2 million in 1997 and it just sold for $15 million. Not a bad little earner there, and he even crashed it a couple of times. Maybe float the purchase of a McLaren with the missus....

20

mikebrisy
Added 2 months ago

@tomsmithidg Now you're talking.

But I live in QLD, and between the terrible drivers on our road and the pot-holes, it would probably never leave the garage if I was to preserve its value!

16

tomsmithidg
Added 2 months ago

@mikebrisy I live in QLD too mate, just sneak out in the middle of the night and drive it down the M1 to the Gold Coast and back ;)

13

edgescape
Added 2 months ago

@thunderhead I would be surprised if Trump was out there supporting main street.

But the whole theme on protectionism definitely resonates well with the view on the ground.

@DrPete I'm not a trader but I do realise that any dramatic change in the macro would impact valuations no matter what happens on the currency market or otherwise.

So the attractive multiples of say AMZN or anything else on the market could get less attractive very quickly!

It's interesting that Gold has held up. Been meaning to sort out my unallocated gold and perhaps now is the time to let go. They are much better than holding a gold company.

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