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Comment by nugget | Hacker News Reader

Remember when nearly the entire business media predicted that if Trump was elected the stock market would crash immediately?

Some of my smartest friends (at hedge funds) placed large bets mid to late 2016 that the market would decline. Now here we are.

The lesson isn't that Trump is awesome for the economy (maybe he is, maybe he isn't) or that the market won't crash tomorrow (maybe it will, maybe it won't) but rather that even the so-called experts are relatively clueless when it comes to financial timing. Remember Brexit? Same story. Good lessons for the rest of us trying to invest. If you want to learn more, read 'The Bogleheads Guide to Investing' [http://fave.co/2jpTKmf] which is an excellent place to start.

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Brexit is a bad example because the predictions were accurate. If you are a foreign investor (your main currency being something other than GBP) and invested in the FTSE then the loss on your GBP was higher than your profit on the index. Slightly different story for UK based investors: While you made a profit on your FTSE ETF, those gains will to some extent be offset by a rise in inflation. Stocks are in general a good protection against higher inflation - which is exactly what is happening in the UK.

To say nothing of the non-UK businesses who sold goods/services for GBP.

They were not. https://en.wikipedia.org/wiki/Opinion_polling_for_the_United...

I was referring to the predictions about market impacts.

It takes a long time for economies to correct to a President's actions- on the order of years. It's better to judge a President's effect on the economy at the end of their tenure than at the beginning.

It's also been shown that the President has less affect on the economy than people's perception would have them to believe.

If that last part is true then we're in for a correction.

> It takes a long time for economies to correct to a President's actions- on the order of years.

Those predictions were for short term effects.

Exactly this! so sick of people using this as some kind of proof achievement. All it means is that financial companies (i.e. banks) are expecting deregulation and are bullish on ability to make money in the volatile environment to come. It has no connection to any macro economics that will be impacted by his decisions being made today.

>It's also been shown that the President has less affect on the economy than people's perception would have them to believe.

You're thinking pre-Trumponomics. The president causes billions of dollars to disappear into thin air with 140 characters. He has a real and measurable impact on the economy, for good or bad.

>It takes a long time for economies to correct to a President's actions- on the order of years. It's better to judge a President's effect on the economy at the end of their tenure than at the beginning.

I'm not certain you completed your statement... The OP was about "experts" being unable to time the market. If it takes years for the market to correct, even if the underlying assumption about a market crash is correct, you have to time it properly. Otherwise you'll take years of loses to make the same off the crash as someone who placed their bets moments before the crash.

With Brexit the pound also dropped significantly. Even if the markets truck along they've been devalued.

The pound dropping has a number of effects (good or bad, it depends on your perspective). It pushed up the market in some areas where the were bargains to be had. It hammered others. It also changed the trade balance of payments

Great in the short term if you're an exporter. Terrible if you're buying a supercomputer, or planning a trip. These sorts of things have a much longer term impact.

I'm just a little confused about this though. If everyone thinks the market will decline due to Trump, then doesn't the market actually decline? What I'm saying is that apparently there were even more people making the opposite guess.

Irrational market.

Without trying to be snarky, this sounds like a post-hoc rationalization. How do you differentiate between an irrational market and a bad prediction? I'm honestly at a loss

I don't have an answer to that but I bet no one does regardless of whether you are an expert, trader, president or man on the street.

the prediction is still bad. if the prediction can't predict that the market is irrational.

nonsense. The people making the predictions were just wrong.

Or a Trump victory was already priced into the market -- it doesn't necessarily mean people weren't bearish on Trump.

My theory is if you have real tradeable info/models that is worth more than ads on a blog you keep your mouth shut until the trade is done.

The invisible hand supports Trump

It is so so so much more nuanced than that.

In one way, the more people that bought put protection on their stock portfolio created the bullish pressure that took weeks to unwind.

(When you buy puts, the market maker is going long the stock as their own hedge. most akin to a bookie)

If you buy puts, MM sold puts and will sell shares against since he is holding a deltaLong position from selling his puts (he makes money if the underlying goes up and lose money if the underlying goes down (which is why you bought the put). To hedge that risk he would sell shares against the sold put so that the risk of the underlying move would be covered.

you're right, but yes the concept I'm referring to was staying delta neutral. When people close their put options before expiration, the MM's create buying pressure.

I would differ with your use of the word "guess".

The underlying dynamics of the market have supported the people who have been long on it.

We love to overestimate the short term impact and underestimate the long term impact of events.

Brexit probably will have large negative effects on the UK's economy... but it will take a long time to figure that out.

Some of Trump's policies are also likely to do long-term damage, but not in the short term.

And here we are, invested in index funds, outperforming the hedge funds again...

Bingo. So many macroeconomic prognostications in this thread, none of which will be correct. The fact that "smart hedge fund" guys are making stupid bets on a market crash is hilarious.

Put money in diverse holdings and let it compound. It's not hard.

I wonder about an index fund bubble. I am mainly using them too but if everyone is and continues to you wonder if it gets too crowded?

> Remember when nearly the entire business media predicted that if Trump was elected the stock market would crash immediately?

It was rather amusing yes. I stayed up late during the election night watching NBC (it is my new comedy channel, alongside Fox and friends).

So after showing a blue map for months reporters were in disbelief and shock, almost in tears. That didn't last long. Because around midnight or so the mood lifted. It looked like after-hours trading and overseas markets were headed down. So just like that the sadness turned to optimism and they printed out a few graphs (because as we all know if it is printed on paper it becomes official) and were telling people how they were right, they predicted a massive crash. There were insinuation of people losing all their retirement money. Etc, etc.

The amusing (or tragic, of course) part is after failing to predict the outcome of the election, they turned right around and with the same confidence were talking about a total economic disaster.

Of course market shot up even higher next day than before.

It is interesting that they would rather want a total crash of the market justify their prediction of Trump.

We won't know what Trumps policies do until 6 months to year from now.

Even then, some policies take years to show an impact - often with amplification or diminution based upon other events that occur long after a President is gone.

Look at how long it took for the housing market bubble to grow before bursting - 15 to 30 years, depending upon which policies you view as being contributing factors.

To be fair, historically at all presidents changing, markets get volatile and usually dip a bit mainly based on the uncertainty. Change typically leads to volatility in the markets so it wasn't a bad move to bet on it.

The market has been in a steady climb for 8ish years and had been sideways for nearly a decade before due to the internet bubble and mortgage/housing/banking based Great Recession from 2008, so it was more robust on a bounce off that massive dip. Trump inherited a very low volatile market.

Flipside is Trump is coming in on record highs, other presidents come in on lower than highs usually due to the change/uncertainty, may lead to a lower total increase over 4/8 years. The last two presidents came in on huge dips/volatile markets, internet bubble busting and housing bubble/fraud in 2006-8 leading to Great Recession while wages stagnated the whole time. This market still has fuel in it as it is still bouncing from those.

I am sure we will see some dips coming from the interest rates going up. No policies or interest rate changes have happened just yet to stop the bull.

Side note, typically Republican presidents have a lower overall performance on the markets[1].

[1] http://www.forbes.com/sites/peterlazaroff/2016/07/26/democra...

Well, hang on.

Firstly, Brexit hasn't happened yet, and nobody knows the plan. Every time the PM asserts something about where we're headed plan-wise, the markets tank. Once Article 50 is invoked, you'll see GBP slide and FTSE will get... interesting. Because a lot of the FTSE is made up companies with a lot of different EU dependencies, it's hard to call where it's going to go. But it's not likely to be good for most investors.

As for Trump and the stock markets? Well, suggesting an "immediate crash", that was silly.

Right now though, the US is in the same place as the UK is with Brexit: nobody is quite sure what's about to happen. He's made a lot of promises that he might not actually be able to keep. If he does, it's likely to cause some serious mayhem in the markets. Not least: he's specifically said he wants to devalue the dollar.

Just let that sink in for a minute: the sitting President of the United States of America got into the Oval Office by promising to lessen the dollar's buying power and value.

The hope then is that this will make US shares more favourable to overseas investors, imports more expensive promoting internal trade (and therefore jobs), and therefore US business more worth overall.

Will it work? Who the hell knows? None of us. And that's why it's too early to call those predictions of decline, wrong.

I think we're really yet to see on both these things, markets usually recover from over-reactions quite quickly, so while we did see those immediate slumps, they did recover.

However, in the longer term, the market will adjust to Trump and Brexit accordingly as actual decisions get made and impacts are felt, it's difficult if not impossible to predict what these might be with any degree of accuracy, one could speculate but ultimately there's just too many moving parts.

I'm not sure I'd promote Bogleheads in specific, but the general theme of passive index fund investing is a good one to make. If you don't want to take big risks or pay big fees, that's the way to go - that's what I do at least.

Markets don't crash from one independent event or even a few events. I think history has shown that. However, any event may act as a catalyst for starting a chain reaction for a series of financial events each directly responsible for the following one.

Could not disagree more. You should actually read some history.

https://en.wikipedia.org/wiki/Black_Wednesday

Just wait until he's able to pass his 35% tariff.

Mainstream financial analysis is junk.

If you knew what a market would do - you wouldn't share it with everyone for free.

You may, however, attempt to manipulate some market through these means.

Brexit hasn't happened yet. The vote happened, but the U.K. has not yet left the E.U.

This is sort of the same sentiment that people have towards things like Bird Flu. It didn't happen, so the experts were wrong, and it was all a load of hot air. But in actual fact a lot of people behind the scenes worked very hard to make sure it didn't become a problem.

Y2K doomsday etc.

Wasn't it expected that the markets would rise as soon as uncertainty about Trump started dropping off? Market pricing tries to look ahead.

Was it expected that "uncertainty about Trump would drop off"? And in 1 week or less?

He did make a 100 day plan.

Who worked behind the scene after the election to make sure that the economy doesn't crash?

>But in actual fact a lot of people behind the scenes worked very hard to make sure it didn't become a problem.

Even more worked harder to sell useless drugs for the epidemic.

I don't understand how the analogy stands? The warning was if [Brexit/Trump] then bad market outcome because those things are intrinsically bad. It's not a bug that can be fixed - it's a situation to be analysed.

Not only that but the bad impact was one of the given reasons to not do the thing in the first place. "A Brexit vote might cause some problems but they are fixable" is a pretty different message to "A Brexit vote will cause an instant recession".

I agree that there was a bird flu effect that you describe. Likewise, I always point people at Y2K as being a case in point where a lot of hype created the work that deflated the danger - but lay people could only see the hype.

That said, who worked to make sure that the market didn't crash after Trump got in office?

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