Australian (ASX) Stock Market Forum

Macro Cycles 2014-2018

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shouldaindex said:
- Applying that to our current situation probably indicates a bottom between Feb and April for this current intra-year downtrend.
Click to expand...
From last highest high, the downtrend has been going for over 9 months and I like the above probability scenario. Certainly more room for a rise in stock prices now. Piling in. :D
 
3 Month Returns after the ASX hits -20% (since 1989):

Recession / GFC Occurs:

1990 -10%
2008 -12%
-------------
Average - 11%

No Recession / GFC:

1992 +19%
1994 +0%
1997 +17%
2003 +9%
2011 +7%
-----------
Average +10%


We hit -20% today, so it'll be interesting where 2016 ends up in this data, due in May.
 
Loving all this data, good work shouldaindex.

My only concern is the amount of leverage in the system...is at unprecedented levels. Does this mean more aggressive swings in either direction?

Faster/deeper bear markets, and more aggressive bulls/recovery from lows?
 
Personally no idea and I like it that way!

The less pre-conceived ideas and subjective judgements in my head the better.

You've probably read how I've split outcomes after a -20% Drawdown scenario into YES / NO to the question of 'Will there be a Recession / Financial Crisis Event?'.

That allows me to play 'time and information' and not overplay my actual economic knowledge, which isn't very much.
 
Junior said:
My only concern is the amount of leverage in the system...is at unprecedented levels.
Click to expand...

I won't speculate on the details but if we're in unprecedented territory then it's wise to consider the possibility of an unprecedented outcome.

This is one, perhaps the only, reason why "it's different this time" might actually be true in this case since there is an actual, known difference when compared to otherwise comparable situations historically. :2twocents
 
There have been 8 years since 1980 that have started with a -10% drawdown in Q1.

7 went on to have +10% rises during the following periods:

Feb to April
Feb to April
March to May
March to May
March to April
April to July
June to August

5 of the 7 years ended in losses.
3 of the 7 went onto recession.

2016 is the 8th.

So, we're currently playing out the -10% drawdown in Q1, followed by the +10% gain in similar time periods as the 7 instances listed above.

The prototype I give the likeliest chance of occurring (which is against my intuition) is that there is no recession and we have in fact reached a bottom. This occurred in 1988 and 2003, where a downtrend started the year before, went through this -10%, +10%, then in the absence of recession or crisis type event, was able to gain and not fall back for the rest of the year to make a slight yearly gain.

If known information changes, then this will change, but I'd be surprised if the above doesn't turn out to be a very good guide.

As mentioned, this goes against my intuition - that there will be further downside due to all the risk factors prevelent currently, but simplying the criteria and using past years as a prototype, the no recession for a downtrend started the previous year, forecasts pretty solid and in fact not very volatile growth for rest of the year.

If anything this is a good case of research vs instinct. We'll see which was right.

Have added the chart I've used. The scenario I've described is highlighted in pink:

ASX Bad Starts Time.jpg
 
Just note we just achieved the expected +10% on the XAO (4706 to 5178) that has occurred in the previous 7 years when there was a -10% drawdown in Q1.

Hard to say what happens from here, as this is where the divergence starts to take hold based on macro outcomes.
 
Probably have included this somewhere already, but this is the U.S Recession timeline for the past 100 years:

U.S Recessions:
2007
2001
1990
1981
1980
1973
1969
1960
1958
1953
1948
1945
1937
1929
1926
1923
1920
1918

Years in between Recessions (Starting from 1918): 2, 3, 3, 3, 8, 8, 3, 5, 5, 2, 9, 4, 7, 1, 9 ,11, 6

We are currently at 9...
 
Smurf1976 said:
So it seems that the US is due for a recession about now.

Food for thought.... :2twocents
Click to expand...

High oil price? - probably not with Iranian oil now available and the oil shale in America ready to enter the market when price is economically viable. Liquefied natural gas recently began exports from U.S. and Australia.

Inflation? - isn't evident yet with FOMC responses as guide

War? - North Korean regime defiant

Unemployment rising? - low and stable, no signs yet

Left field? - ???????
 
Oil and the Middle East were so much a part of the last 50 years' experience.

1973: OPEC
1980/81: OPEC / Volcker wash out
1990: Iraq 1
2001: Sep 11, Iraq/Afghanistan
2007: Nominally a credit event, but preceded by a very large spike in oil prices


But, no problem now. The Middle East is an oasis of peace and, so, all is well.
 
What do you guys think about the oil prices.. will it stay surpressed?

Increased production + US coming online
 
ggkfc said:
What do you guys think about the oil prices.. will it stay surpressed?

Increased production + US coming online
Click to expand...

US production is now in decline once again. The tight oil ("shale") fields aren't profitable at the present price of oil, so there's no point drilling more (and the rig count has collapsed pretty spectacularly) whilst those fields already in production have a very high decline rate when compared to conventional oil fields.

Short term, anything could happen and quite likely will. Long term, either we're going to use less oil or the price is going to have to go up in order to make production profitable. :2twocents
 
One thing to watch for is more positive news out of the US (see Citi Economic Suprise Index trend up). News good, USD up, commods/oil back down might be worth watching.

Re Fundies also read there is a cap on oil price as higher movement will bring shale producers back into play by opening wells again.
 
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