The two very smart finance people I'm friends with have been predicting a major recession or depression in 2020 for several years now.
Seems like the stock market is in a significant bubble. The unprecedented QE is a big part of the reason; tech stocks are exploding in particular as the real economy crumbles.
Taking the broader view, inflation has continued at breakneck pace; price inflation since the year 2000 has been 50.47%; if you go by the price of gold, price inflation has actually been nearly 80%. Going by that 50% inflation figure, if you had $50,000 in the bank in 2000 and didn't invest it and collected no interest on it, it'd have lost 1/3 of its 2000 buying power and you'd be able to buy only about 2/3 as much with that $50K today as you could have 20 years ago.
This creates a problem re: where to keep your money. If you keep it in cash you are dripping wealth over time (due to inflation). If you stick it in the stock market, that's good so long as the stocks keep going up and up. But they can't/don't/won't always. Inflation is not going to stop either; every large government is drowning in debt, and the way it keeps its head above water is by printing more money to make its debt burden relatively lesser. Any time inflation slows, and the government is in danger of getting crippled by its debt, it can just print more money (and does). Inflation is a feature of the system, and is not going to go away.
What looks like is going to happen is that a.) we'll enter a recession/depression (the MSM was saying "this could be worse than the Great Depression"
back in March; they're not saying that anymore, even though the real economy
actually looks worse than it did in April), b.) but inflation will continue.
In an inflationary recession, you typically want to put your money into precious metals (as both stocks and cash are declining in value). Here's how gold performed after the 2008 recession, when it nearly 3x'ed in value compared to 2007, then settled at about 2x its 2007 numbers for about 6 years, before starting to climb rapidly again mid-2019:
My friend Patrick is the former head of the USMC budget out of the Pentagon. He's the one who introduced me to inflationary vs. deflationary recession vs. not investing principles. He has a good book on it (and general investing) anyone may want to give a read here:
I am seeing a lot of stuff now suggesting the place to be is precious metals and/or Bitcoin, which is being treated as a kind of "digital gold" at this point. There are various predictions about Bitcoin gearing up for another bull run (
here's one by the former CEO of Prudential).
Anyway -- I am not an expert and this is not investing advice. Obviously.
The truth though is nobody actually knows. The market is a largely emotional thing driven by people's confidence or lack thereof in various investment vehicles.
Here's the counterpoint to the "market bubble might pop soon" thinking: Donald Trump took control of the Federal Reserve (which was previously operated exclusively by private bankers) by gaining control of nearly all the seats on the Fed's board of governors (
he's appointed 4 of the 5 current governors, and has nominees for the two additional vacant seats; governors have 14-year terms), then folding it in under the Department of the Treasury. It seems like you're aware of this,
@Ambiance. While the Fed might've let the economy go into a recession previously (thus most likely nuking Trump's chances at reelection), he's the one at the helm of money-printing now. And he's likely to keep pumping as much money into the market as he needs to keep the stock market afloat, at least until his reelection. What happens after that?
Nobody knows.
So -- the market's in a bubble, I think is clear.
But the bubble might extend for some time.
The Fed might keep pumping more and more money into the market on Trump's direction.
Trump likes to look like he's winning. So he might just keep having them do that for the next four years too, if he wins.
If Biden wins, he isn't going to want to get in there and have a market collapse. So he, too, might direct the Fed (now that it's under Department of the Treasury control) to just keep flooding the markets with cash.
This is good short-term, if you don't want a crash. It is probably not-so-good long-term, as the bubble gets pumped bigger and bigger and bigger before the inevitable crash.
Regardless it could well be the situation that the depression we were probably due for this year, and should by rights experience, considering all the business closures and layoffs and furloughs for jobs that probably aren't coming back in addition to all the problems that were already there pre-lockdowns, gets pushed off another 2 or 3 or 4+ years.
You'd expect at that point there to be a pretty horrific bubble popping. But who knows? Folks were saying that about the 2008 recession. But while that got a bit bad, it didn't go nearly as bad as many thought.
The truth is, nobody really knows what's going on. No one has a good handle on what the actual likely timelines are.
Chase