RE:RE:RE:Taking off!!!
Tan4646 wrote: Perhaps, but wasn't the most recent inflation caused by supply side factors. In my opinion the Chinese demand while it will increase will not be enough to outstrip the increased supply going forward in any significant way. China is moving towards a digital and green economy.
I certainly wouldn't call for a return to 2021 exuberance but I think it is entirely possible to have a reasonable appreciation in the valuation of risk related equities.
I don't see any equivalentce to the dot com bubble however.
Just my POV.
Hi Tan, here is my comparison to the dotcom era. I would add that this environment has elements of the 1980/1990 inflationary time periods but with valuations closer to the dotcom era at the peak of this cycle. It has also has elements of the housing bubble in the GFC but without the bailout from the Federal Reserve. I find this to be very unique in that it has elements of past recessions all combined into one.
In Jan 2001, the Nasdaq rallies 12.2% in the first month. S&P rallies 3.4% after an abysmal 2000. In the first month of January 2023, the Nasdaq rallied 10.4% to start the year. The P/E ratio on the S&P is around 22 which compares to 27 in Jan 2001. Fed funds was pivoting at about 6% while we are approaching 5%. The 10s minus 3 month yield curve inverted in August 2000 vs Oct 2021. The nber declared a recession in March 2001 and it is unknown if we are about to enter one this year. Too many similarities. Both were driven largely by speculative tech stocks with poor cash flow and elevated debt. The difference being todays companies actually have a legitimate business model which makes the current situation more favourable.
There were 3 bear market rallies of 20% or more gains on the S&P during the dotcom era and today we have had 2 rallies of around 20% each. I will end off by saying the S&P and Nasdaq ultimately bottomed in October of 2002. Is the worst behind us?
Only time will tell.