1929 vs 1987 vs 2018

Just a friendly reminder this a rather normal looking midterm year so far. We got spoiled having such low volatility for so long. Only time will tell how this plays out. I am sure not going to ditch my trading plan now and become a Casandra, making predictions as to the level price reverses, instead I will get my feedback from the market.

'Traders Almanac' 2018

Over the last 17 midterm years, S&P 500 has declined an average 16.90% sometime during the year. The biggest decline was 37.6% in 1974 and the smallest was 4.36% in 1958. Once the decline ended, S&P 500 was higher 1-, 3-, 6- and 12-months later 100% of the time. The average gain from the end of the midterm year decline to one year later was 32.29%.

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I tend to wonder. Has anyone else ever thought of the trickle-down effect of the time between a policy implementation and the time it comes to fruition? Of course we all have, we're all really smart? But what about all the "others" out there?

Let's take a recent example...

Frumpers croon about how Trump's administration boosted the economy. Wow, look at those 2017 numbers! Hrmm. Well, it was nothing Trump did. Trump "inherited" a growing economy. But that ball started rolling down hill many years before Trump ever ran for office. It was Obama's fiscal policy at work, along with many other variables in the marketplace at the time. In Fiscal 2017, Obama's policies were in place. So the boosts to the economy were Obama's doing. (Remember people, the USA fiscal year starts on Oct 1st of previous year. Fiscal 2017 was Oct 1st 2016 to Sep 30th 2017. That's Obama.) Here we are in 2018 and Trump's actions are starting to take hold. His proposed tax-cut for businesses boosted speculation about future corporate earnings. Markets went yay. Once the tax-plan was announced, everyone went yay. Then the plan was signed into law and the market side-lined to see the next step. WAGE GROWTH! Oh nos! Market tanks a bit. But it recovered thanks to FAITH in pro-corporate policy. Then Trump starts this trade-war shit and look where we are. FuxX0R3D. Markets are whacked.

Take it back to the previous election. Obama "inherited" the 2007 crash. What caused that crash? Lots of stuff that did not have to do with Obama, but his predecessor, George W. And what did George W. inherit? 9/11. A major turning point in world history. What did George W. inherit? Bill Clinton. 1992-2000. What did Clinton inherit? George H.W. Bush, 1988-1992. What did George H.W. inherit? Reagan. 1980-1988. What did Reagan inherit? Carter. And so it goes, down the line.

Now do a little mental exercise for yourself and think about how long it had been for major turning points in economic history to manifest after the election of a new president.

Curious how it usually happen 3-4 years after the previous election, yeah? Think about it.

The trickle-down effects are very clear...When a POTUS implements governmental changes, it takes years for the effects to be realized. But those changes are skewed and tempered by what is happening with the rest of the world. Major economic moves cannot really be blamed on "an administration." In my opine, the world is moving too fast for us to be able to pin any major economic hiccup on a single administration. If we were still in the days of telegraphs and Morse code, perhaps we could. Perhaps, if the world was in such a state that we would NEED another 4-term FDR, we'd have a more pointed conversation about how much we NEED the leadership. But I reckon' the FDR-type days are long gone.

And God save the Queen if we have a 4-term Trump. I'd rather see my cat in office for 13 years.

https://goo.gl/images/ncD4Wu
 
Overnight said:
I tend to wonder. Has anyone else ever thought of the trickle-down effect of the time between a policy implementation and the time it comes to fruition? Of course we all have, we're all really smart? But what about all the "others" out there?

Let's take a recent example...

Frumpers croon about how Trump's administration boosted the economy. Wow, look at those 2017 numbers! Hrmm. Well, it was nothing Trump did. Trump "inherited" a growing economy. But that ball started rolling down hill many years before Trump ever ran for office. It was Obama's fiscal policy at work, along with many other variables in the marketplace at the time. In Fiscal 2017, Obama's policies were in place. So the boosts to the economy were Obama's doing. (Remember people, the USA fiscal year starts on Oct 1st of previous year. Fiscal 2017 was Oct 1st 2016 to Sep 30th 2017. That's Obama.) Here we are in 2018 and Trump's actions are starting to take hold. His proposed tax-cut for businesses boosted speculation about future corporate earnings. Markets went yay. Once the tax-plan was announced, everyone went yay. Then the plan was signed into law and the market side-lined to see the next step. WAGE GROWTH! Oh nos! Market tanks a bit. But it recovered thanks to FAITH in pro-corporate policy. Then Trump starts this trade-war shit and look where we are. FuxX0R3D. Markets are whacked.

Take it back to the previous election. Obama "inherited" the 2007 crash. What caused that crash? Lots of stuff that did not have to do with Obama, but his predecessor, George W. And what did George W. inherit? 9/11. A major turning point in world history. What did George W. inherit? Bill Clinton. 1992-2000. What did Clinton inherit? George H.W. Bush, 1988-1992. What did George H.W. inherit? Reagan. 1980-1988. What did Reagan inherit? Carter. And so it goes, down the line.

Now do a little mental exercise for yourself and think about how long it had been for major turning points in economic history to manifest after the election of a new president.

Curious how it usually happen 3-4 years after the previous election, yeah? Think about it.

The trickle-down effects are very clear...When a POTUS implements governmental changes, it takes years for the effects to be realized. But those changes are skewed and tempered by what is happening with the rest of the world. Major economic moves cannot really be blamed on "an administration." In my opine, the world is moving too fast for us to be able to pin any major economic hiccup on a single administration. If we were still in the days of telegraphs and Morse code, perhaps we could. Perhaps, if the world was in such a state that we would NEED another 4-term FDR, we'd have a more pointed conversation about how much we NEED the leadership. But I reckon' the FDR-type days are long gone.

And God save the Queen if we have a 4-term Trump. I'd rather see my cat in office for 13 years.

https://goo.gl/images/ncD4Wu
More...

In fairness to Trump, he strongly improved business confidence and that pushed that market rally further. Now we have to see if that hope will turn to reality.
 
On the Dow, only a monthly close beneath 22400, which is support on the monthly level, would imply a serious correction. Until then, we are still in a normal consolidation phase. A monthly close beneath it is a highly unlikely scenario, and the fundamentals do not support it. A rapid rise in interest rates in the U.S CB Discount rate should happen, key targets being April, June and August. A close of 2.25% implies that the rate should double in a matter of mere months. Except perhaps for an initial drop in equity value, it should show a trend of equities rising alongside interest rates.
 
The interest rate environment is similar to the 60's. Any charts that attempt a similar exercise to a year from the 60s?

A 17% correction would be in line with the current levels of the vix.
 
tradingjournals said:
The interest rate environment is similar to the 60's. Any charts that attempt a similar exercise to a year from the 60s?

A 17% correction would be in line with the current levels of the vix.
More...


Interesting tradingjounals. How are you computing a 17% correction in line with current levels of VIX? VIX seems to be a bit above its historic norm, but not really that much. Being not that much its historic norms and predicting a 17% correction seems a bit strange, but I'm just trying to learn. Thanks!
 
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