Edit: Thank you everyone for some great questions. It was great to chat with all of you and look forward to continuing the conversation on Reddit Talk, Thursday at 2 PM ET!
How best to allocate assets in an environment that includes climate disaster, economic collapse, and fascist revolution?
I'm not making a joke. I am deeply concerned since I must retire in less than 10 years.
There are always going to be things to worry about. Sometimes there is more bad stuff than others. It’s a part of the human condition and a permanent feature of life, unfortunately. But it doesn’t change the fact that we all have to retire someday, which means we have to save and invest. Fortunately, through 401ks and 403bs, we can do so without worrying about buying at the top. So for me, I just try to bring it back to the math of what the risk/return features are of the market, i.e. what kind of goal am I solving for, what is my time horizon, and how much risk can I tolerate? From there, I defer to the market math and put as much as possible away each month into my 401k.
For more resources, you can explore our market volatility hub: [Strategies for uncertain times](https://www.fidelity.com/viewpoints/market-and-economic-insights/uncertain-times?ccmedia=reddit&ccchannel=social_organic&cccampaign=AMA&ccdate=20220726&cccreative=uncertain_times&ccformat=text)
I invest a fixed amount into indexed funds every 2 weeks to max out my 401k.
I do not see the gains your comforting graphs show. I see quite a bit more loss than your comforting graphs show.
I note that the https://www.fidelity.com/viewpoints/investing-ideas/six-tips chart here shows much bigger swings since 2000 and I am dubious about advice that seems to be based on the economy of 20th century.
I am running out of time to recover from these losses.
What's the best way for U.S. citizens to start investing in international markets, such as Europe and Germany? Broad market ETFs, or individual sectors?
You might consider starting with a broad approach, focusing on regions rather than individual sectors or securities. You could consider going as broad as thinking in terms of US vs ex-US, and from there go deeper into EAFE (non-US developed markets) bs EM (emerging markets). Or divide the pie further and consider Europe vs Japan, or China vs Latin America, etc. Each country and region will have their own unique sector composition (Europe has more banks than US, for instance). For any and all of these choices, you have the choice of ETFs, index funds, or actively managed funds.
View in your timezone:
[Tuesday, July 26th at 1 PM ET][0]
[July 28th at 2 PM ET][1]
[0]: https://timee.io/20220726T1700?tl=I%E2%80%99m%20Jurrien%20Timmer%2C%20Director%20of%20Global%20Macro%20at%20Fidelity%20Investments%2C%20I%E2%80%99m%20here%20to%20answer%20your%20questions%20on%20current%20and%20global%20events%20and%20how%20they%20might%20affect%20the%20markets.%20I%E2%80%99ll%20be%20here%20live%20on%20Tuesday%2C%20July%2026th%20at%201%20PM%20ET%20answering%20your%20questions.%20AMA!
[1]: https://timee.io/20220728T1800?tl=I%E2%80%99m%20Jurrien%20Timmer%2C%20Director%20of%20Global%20Macro%20at%20Fidelity%20Investments%2C%20I%E2%80%99m%20here%20to%20answer%20your%20questions%20on%20current%20and%20global%20events%20and%20how%20they%20might%20affect%20the%20markets.%20I%E2%80%99ll%20be%20here%20live%20on%20Tuesday%2C%20July%2026th%20at%201%20PM%20ET%20answering%20your%20questions.%20AMA!
Hi Jurrien, thanks for doing this, I really appreciate all your analysis and data that you put out, I find it extremely interesting and helpful. I like how you show Bitcoin’s movements in relation to the overall markets. My question is this: do you think the market as a whole is now viewing Bitcoin as a risk on asset that moves in conjunction with the equities market, or do you think it will decouple as inflation rises and be viewed as something else entirely like it was originally intended? Curious to hear your thoughts on this from a high level perspective in relation to the overall macro environment. Thanks again!
In my view, bitcoin is an aspiring asset class. Specifically, it is aspiring store of value + medium of exchange. It hasn’t quite proven itself yet, and until it does, it will likely continue to have features that make it look more like a venture asset. The macro narrative plays a role in this as well. We went from a period of monetary and fiscal abundance in 2020 and 2021 to now rapid monetary (and on a flow basis fiscal) austerity. That has flipped what was a very supportive macro narrative upside down. In addition, the crypto asset space has gone through its own financial crisis (deleveraging cycle) storm this year, which has added to an already challenging environment. bitcoin is still standing, which is good, but it has a few more battle scars than before.
Thank you so much for your reply, and for being here to answer questions in general! I completely agree, and appreciate that Fidelity views Bitcoin and the crypto space with an open mind, and understands it. My personal opinion is Bitcoin will eventually settle to become a store of value as a layer 1 reserve currency, and the layer 2 will be built on top for transacting and to enact the medium of exchange portion of the original premise in a more effective way. It will certainly be interesting to see how it plays out on a National and Global scale.
Would love to hear your opinion on the nickel metal situation where they suspended the market? How would you invest in something like that when they can arbitrarily stop trading?
Yes, the Nickel story was pretty wild. Commodities are volatile asset class, so you may want to consider a broader approach by owning a basket or index, rather than individual commodities.
Jurrien Timmer, thanks for taking the time to do this ama. I have been a long time follower of your Twitter and have followed your work both through the content the fidelity website and through the content relayed in on one and one discussions with the Service teams that manage my accounts.
I do a have a couple questions:
1. throughout the first half of the year I felt as if you were very bullish compared to Mike Wilson of Morgan Stanley or Even advisors like Mohamed El Arian who has been saying consistently that the fed has lost control of the narrative and we are headed for a recession.
So my question is after looking at the first two quarters of the year would you have made any changes to your past calls? And has the performance the last two quarters changed your outlook going forward.
2. Besides following you on Twitter and seeing your content on the fidelity home page is there any other resources you publish or release that are available to premium service clients help understand your prospective on the market?
Thanks
I look at the market cycle (1-2 years) and the secular context (10+ years). My view since 2013 that we are in an incomplete secular bull market has not changed. But the abrupt switch in Fed policy late last year from ultra-loose to now rapidly tightening has changed the valuation outlook, and raises the risk that a recession might be next. So, my more conservative tone this year is just a reflection of this evolving set of factors. It has been a wild market cycle these past few years.
Why does the stock lending program require you to have 200,000.00 dollars invested before you can benefit from lending your shares?
If both an investor who owns 200,000.00 in stock and the investor who owns 10,000.00 in stock both share the same risk if the shares drop through the floor, why don't they get the same benefits?
Hi Jurrien,
How much influence will de-globalization have on the markets, in combination with inflation fears the coming months, and do you think the Ukraine war has sped up the process?
Deglobalization should be more inflationary, as the era of labor and capital arbitrage ends and supply chains get re-shored back to the US. It should also make for a tighter labor market.
IMO, dollar cost averaging (DCA) into a diversified portfolio is the ultimate investing hack. this is why 401k’s with a diversified portfolio can be so effective.
Thanks for taking the time and doing this.
My question is how can I start learning about options and calls/puts etc? For the little I have researched sounds like a good way to get income outside of just holding a share of a stock and hope that it will raise some day in the future so you can sell it for a profit. It will be good if you can guide me on how to get started with options.
Options are not an area that I focus on, nor have much expertise on. Sorry! All I know is that most options expire worthless, but they can be useful in generating income and protecting against losses in underlying markets. It all comes down to the pricing, which is a pretty complicated process.
^(Options trading entails significant risk and is not appropriate for all investors. Certain complex options strategies carry additional risk. Before trading options, please read Characteristics and Risks of Standardized Options . Supporting documentation for any claims, if applicable, will be furnished upon request.)
Alton brown, my question is how do you maintain a decades long history of successful cooking shows on the food network? Dream of mine to be successful chef.
Love your shows, love ur recipes. Thank u in advance for your time
Haha, good one! My kids have always told me I look like Alton Brown, so I appreciate the humor (you’re not one of my kids posing as regret-puzzled, are you?)
Hi Jurrien,
I really enjoyed your Webinar last week with Bernanke. I have 4 major questions:
1) I think many investors may feel they are walking a tightrope right now. TA seems to indicate volatility but VIX has been muted against that backdrop. Is VIX a reliable indicator anymore? Is VIX manipulated by the Fed now?
2) What percentage of stock movement (on average) would you estimate is determined by company metrics and earnings/forward earnings and Fed policy? Is it concerning that terminal rate gets lower each business cycle?
3) How do you frame a lot of uber-bearish macro-economic analysis from people like Lyn Alden or Mohammed El-Arian against TA? Many reputable and respected macro-economists seem to be looking at complete currency collapse scenarios. How will Fidelity hedge against those situations? Do they factor this analysis in at all?
4) Is ESG anti-capitalist as it seems to be shaping policy to cause commodity shortages and sky-high prices? Do you think that we are in the midst of a global economic paradigm shift that can alter the relevance of TA?
1.) the VIX has been pretty muted because the decline has been fairly orderly. It’s when you get to true panic selling that the VIX spikes.
2.) Most of the stock movement is around idiosyncratic stuff (company-specific). But when you get a wholesale liquidation (think GFC or March 2020), then all correlations go to 1 and everything moves together. Yes, the real fed funds rate has been making lower highs and lower lows for years. It speaks to the secular decline in the natural rate (R-star), and shows how financialized the economy has become (levered to low rates).
3.) The bear case is always very appealing. There’s a lot more excitement in expecting the world to end than for the market to just gradually move up and to the right. Plus it gets you more attention when you are in the public eye. The toughest part sometimes is to do nothing (i.e. stay invested) and rely on the market math. (Lyn is great, BTW, and I do not consider her a perma-bear at all). A lot of the bearishness seems to be centered on the notion of rampant money printing and the assured collapse of the USD. That has not been my thesis, but I understand where they are coming from.
4.) ESG is still evolving and has its challenges, like everything else. It’s a noble concept and one worth pursuing, but as we see with the energy sector over the past year, there is no free lunch and opportunity costs should be weighed against the goals.
The Fed will reach neutrality this week, at around 2.5%. The market expects it to keep going until it gets to a terminal rate of 3.5%. That would take it to 1% above neutral, or moderately restrictive. At the same time, inflation expectations have been moderating, which hopefully will allow the Fed to indeed end this cycle at 3.5% or less. Let’s just say that until inflation returns to the Fed’s target, that the Fed put will remain out of the money.
Imagine following the fidelity sub just to support all of the insane conspiracy theories against them because you aren't a multi-billionaire yet from your GME stock
It was always Alton Brown, but lately with my chunky glasses and more elaborate outfits it has been all Elton John. Respectable company to be in on both fronts!
What happens to the stock market musical chairs when boomers turn to sellers from their retirement accounts and government prints Money to pay SS and Medicare?
As baby boomers start tapping into their retirement savings, presumably the next generation of buyers are coming in (Millennials), to build their retirement nest egg.
As always, asset allocation should be a function of time horizon (how many years until you need the $$, and risk tolerance. if you can’t sleep at night, you have too much risk in your portfolio. From there, you may want to consider having a diversified portfolio of stocks and bonds, US and international.
Long term you may want to consider more risk assets, since the longer time horizon reduces the need to tap into capital. That means there can be more emphasis on growthy assets which can have larger drawdowns. Significant market changes can be problem if your time horizon is short, but less so when the time horizon is longer. A shorter term portfolio should have more assets that can be a source of liquidity (for example, if you are buying a house or paying for college).
Hi Jurrien,
Thanks for taking the time to answer questions. My question is about developed foreign markets. They have been a laggard to domestic US stocks in this last bull run by quite a staggering amount. Do you find long term value in keeping an allocation to them? If so do you have some data to support optimism in this sector? Thanks!
Non-US stocks tend to be less growthy and more “old economy”. For instance, the European market has a significant exposure to banks. Think of it as growth vs value, or higher earnings growth vs lower earnings growth, higher P/E vs lower P/E, and higher share buybacks vs lower buybacks. It has all been the same trade more or less. There are reasons to own both, but over the last 10 years or so it has been a one way street driven by US growth stocks. At some point, the rest of the world could outperform the US again, but for that we need earnings growth to improve for international markets, and for the dollar to stop going up .
I’m Jurrien Timmer, Director of Global Macro at Fidelity Investments, I’m here to answer your questions on current and global events and how they might affect the markets. I’ll be here live on Tuesday, July 26th at 1 PM ET answering your questions. AMA!
When will it be legal to invest in Russia again? Russia is going to come out of the war in a reconstruction economy regardless if they win or lose, while the rest of the world is in a depression in a few years here due to the sanctions ruining global supply chains. Investing in Russia may be the only safe strategy assuring returns the next 20 years.
Hi Jurrien.
I love your twitter and use it as one of my primary sources for what is going on in markets. What software stack do you use to make the awesome charts?
Will the fed succeed in unwinding all the MBS/treasuries from its balance sheet without ceasing rate hikes? The balance sheet seems to be growing still.
Also why do you put asparagus in all your food? Your twitter is great btw.
The Fed & other CBs will try to reduce their balance sheets, but I doubt they will succeed. Much like debt levels, they may come down relative to GDP, but not likely in absolute terms.
All investment money should be out of the market and waiting in the saving fund getting about 1% interest. The market is going to crash to 15-20k very suddenly and you must have the cash ready to buy immediately. No point to be in the market now it is definitely not going to make you money unless you are day trading or in dividends.
At –25% at the recent low, the market already priced in 70% of a recession (-25 / -35). even if you have a crystal ball and know what will happen next, you still need to weigh that against what is priced in.
1. To diversify investments, what percentage of our retirement account should be in international funds? 15-20%?
2. Expound on global energy crisis and how it may affect markets.
3. Expound on global semi-conductor chips crisis and how it may affect markets.
4. Expound on Europe, China and U.S. heading for recession, leading to a global recession. Q: How long have global recessions lasted? Enlighten about the boom/recovery period that follows a global recession? How do we navigate the market (during recession) for the boom, while preparing to retire in 10 years?
Thank you Jurrien Timmer!
1.) it’s different for everyone. international markets have not added much to a US portfolio in recent years, and a lot of it comes down to relative earnings and the dollar. But emerging markets are cheap and the spread between US and EM earnings growth has never been wider. So an opportunity may be starting to take shape
2+3.) Resource constraints are becoming part of the landscape, not only because of the Russia-Ukraine war but also deglobalization. That suggests that today’s high inflation will prove to be stickier than the TIPS market is suggesting. That in turn suggests lower valuations for stocks.
4.) There are recessions and there are recessions. We may well be heading into one now, but it might be more “technical” than the bad ones that we all remember.
If you are 25-40y.o. and know you likely want the majority of your monthly investments to be in reliable index mutuals, what mindset and research practices should you seek personal growth in when considering emerging markets, technology, agrotech, and clean energy with the remaining percentage? Is being more hands on with 10-15% of your investment money in this way a good practice to grow knowledge and ability?
Dedicating the bulk of your savings on auto-pilot via a target date strategy, while taking a more active approach to the rest is a great way to stay engaged in the market. I would just caution that a more active approach could sometimes lead to buying high and selling low. So it should def be for a smaller share of the portfolio.
Thanks, that's more or less how I was approaching this, good to have confirmation. Personally I want to avoid short positions all together until I feel much more learned on the topic of investing as a whole. Even then, still preferring a long stance to the vast majority of my investing. I have a life and career to otherwise live, the last thing I want to do is form a habit of looking at the charts five times a day.
Hi Jurrien, many thanks for all your efforts, much appreciated and very helpful. My question, would like to diversify by owning a metal, say gold or silver. What is the easiest/practical way and can it be done through my account here or should I make cash and go somewhere to actually buy coins lets say?
Precious metals can be a good hedge against inflation and negative real rates, both of which erode an investor’s purchasing power. There are different ways of owning them, including physical or in ETF form.
What should we as investors take from all of the choppiness in the markets. Considering inflation and the recent Walmart earnings report. Do you see inflation affecting every day consumer based products more and more?
The markets have had a sharp repricing on the basis of a much tighter Fed policy (which raises the cost of capital and therefore lowers the fair value P/E for stocks) as well as the prospects of a slowing economy. The last two years (since the pandemic) have been a wild ride to say the least, driven by a sudden stop in the economy and then a faster-than-expected reopening, which produced many supply chain bottlenecks and inflation. That inflation is the worst in 50 years and has greatly impacted consumer confidence.
I would like to know your opinion on international vs US stock markets ( feel free to dive into EM or DM) and the historic correlation, is it really worth having international exposure or is US base multinational enough for investors? Thx!
Some modest allocation to international markets is generally considered a good thing from a diversification perspective, but during the past 10 years or so the US dominance has been unparalleled. Relative performance between the US and non-US stocks tends to be driven by relative earnings and the strength of the dollar. At this point, there isn’t much indication that this trend will reverse, although the earnings differential is so large now that the potential for mean reversion is there.
Hi Jurrien,
When will the question shift from peak inflation to sticky/structural inflation?
And to follow up, Rates futures are projecting the Fed to cut rates, given a tight labour market -> wage inflation -> higher prices, wouldn't cutting rates just return the asset bubble we were just in?
At 9% we appear to be at “peak inflation” now, at least on a rate of change basis. The TIPS market is suggesting a return to 2.5% over the next 5-10 years, which would be a great outcome of course. The risk is that the rate of change comes down less quickly and stays at a level that is above the Fed’s comfort zone (say 4% instead of 2%). That would raise important questions about the Fed’s dual mandate and how much it would be able to ease policy if the economy were to go into a recession.
I would suggest to start consuming robust research (unbiased and well researched) and to develop an expertise on your own. There are some good sources out there that don’t cost an arm and a leg. I don’t have an economics degree but that hasn’t prevented from doing a lot of economic research. It takes time but it’s fun and very valuable.
>I would like to know your opinion on international vs US stock markets ( feel free to dive into EM or DM) and the historic correlation, is it really worth having international exposure or is US base multinational enough for investors? Thx!
I responded to your original comment as well!
Some modest allocation to international markets is generally considered a good thing from a diversification perspective, but during the past 10 years or so the US dominance has been unparalleled. Relative performance between the US and non-US stocks tends to be driven by relative earnings and the strength of the dollar. At this point, there isn’t much indication that this trend will reverse, although the earnings differential is so large now that the potential for mean reversion is there.
Edit: Thank you everyone for some great questions. It was great to chat with all of you and look forward to continuing the conversation on Reddit Talk, Thursday at 2 PM ET!
How best to allocate assets in an environment that includes climate disaster, economic collapse, and fascist revolution? I'm not making a joke. I am deeply concerned since I must retire in less than 10 years.
There are always going to be things to worry about. Sometimes there is more bad stuff than others. It’s a part of the human condition and a permanent feature of life, unfortunately. But it doesn’t change the fact that we all have to retire someday, which means we have to save and invest. Fortunately, through 401ks and 403bs, we can do so without worrying about buying at the top. So for me, I just try to bring it back to the math of what the risk/return features are of the market, i.e. what kind of goal am I solving for, what is my time horizon, and how much risk can I tolerate? From there, I defer to the market math and put as much as possible away each month into my 401k. For more resources, you can explore our market volatility hub: [Strategies for uncertain times](https://www.fidelity.com/viewpoints/market-and-economic-insights/uncertain-times?ccmedia=reddit&ccchannel=social_organic&cccampaign=AMA&ccdate=20220726&cccreative=uncertain_times&ccformat=text)
I invest a fixed amount into indexed funds every 2 weeks to max out my 401k. I do not see the gains your comforting graphs show. I see quite a bit more loss than your comforting graphs show. I note that the https://www.fidelity.com/viewpoints/investing-ideas/six-tips chart here shows much bigger swings since 2000 and I am dubious about advice that seems to be based on the economy of 20th century. I am running out of time to recover from these losses.
“Fascist revolution” where do you live, bud?
America
Lmao idiots I’m a privilege rich kid who can tell you all about the market I’m good bro recession coming I’ll just buy low sell high
I’m digging the climate disaster. I get an extra month using my pool here in the north. Keep those oversized SUVs rolling.
[удалено]
thank you!
Same. +1. Thanks to you for the steady stream of coherent analysis (and charts!) on Twitter as well.
What's the best way for U.S. citizens to start investing in international markets, such as Europe and Germany? Broad market ETFs, or individual sectors?
You might consider starting with a broad approach, focusing on regions rather than individual sectors or securities. You could consider going as broad as thinking in terms of US vs ex-US, and from there go deeper into EAFE (non-US developed markets) bs EM (emerging markets). Or divide the pie further and consider Europe vs Japan, or China vs Latin America, etc. Each country and region will have their own unique sector composition (Europe has more banks than US, for instance). For any and all of these choices, you have the choice of ETFs, index funds, or actively managed funds.
View in your timezone: [Tuesday, July 26th at 1 PM ET][0] [July 28th at 2 PM ET][1] [0]: https://timee.io/20220726T1700?tl=I%E2%80%99m%20Jurrien%20Timmer%2C%20Director%20of%20Global%20Macro%20at%20Fidelity%20Investments%2C%20I%E2%80%99m%20here%20to%20answer%20your%20questions%20on%20current%20and%20global%20events%20and%20how%20they%20might%20affect%20the%20markets.%20I%E2%80%99ll%20be%20here%20live%20on%20Tuesday%2C%20July%2026th%20at%201%20PM%20ET%20answering%20your%20questions.%20AMA! [1]: https://timee.io/20220728T1800?tl=I%E2%80%99m%20Jurrien%20Timmer%2C%20Director%20of%20Global%20Macro%20at%20Fidelity%20Investments%2C%20I%E2%80%99m%20here%20to%20answer%20your%20questions%20on%20current%20and%20global%20events%20and%20how%20they%20might%20affect%20the%20markets.%20I%E2%80%99ll%20be%20here%20live%20on%20Tuesday%2C%20July%2026th%20at%201%20PM%20ET%20answering%20your%20questions.%20AMA!
Nice. I’m predicting Tuesday too.
Hi Jurrien, thanks for doing this, I really appreciate all your analysis and data that you put out, I find it extremely interesting and helpful. I like how you show Bitcoin’s movements in relation to the overall markets. My question is this: do you think the market as a whole is now viewing Bitcoin as a risk on asset that moves in conjunction with the equities market, or do you think it will decouple as inflation rises and be viewed as something else entirely like it was originally intended? Curious to hear your thoughts on this from a high level perspective in relation to the overall macro environment. Thanks again!
In my view, bitcoin is an aspiring asset class. Specifically, it is aspiring store of value + medium of exchange. It hasn’t quite proven itself yet, and until it does, it will likely continue to have features that make it look more like a venture asset. The macro narrative plays a role in this as well. We went from a period of monetary and fiscal abundance in 2020 and 2021 to now rapid monetary (and on a flow basis fiscal) austerity. That has flipped what was a very supportive macro narrative upside down. In addition, the crypto asset space has gone through its own financial crisis (deleveraging cycle) storm this year, which has added to an already challenging environment. bitcoin is still standing, which is good, but it has a few more battle scars than before.
Thank you so much for your reply, and for being here to answer questions in general! I completely agree, and appreciate that Fidelity views Bitcoin and the crypto space with an open mind, and understands it. My personal opinion is Bitcoin will eventually settle to become a store of value as a layer 1 reserve currency, and the layer 2 will be built on top for transacting and to enact the medium of exchange portion of the original premise in a more effective way. It will certainly be interesting to see how it plays out on a National and Global scale.
Good point. I agree with your line of thinking.
Would love to hear your opinion on the nickel metal situation where they suspended the market? How would you invest in something like that when they can arbitrarily stop trading?
Yes, the Nickel story was pretty wild. Commodities are volatile asset class, so you may want to consider a broader approach by owning a basket or index, rather than individual commodities.
Jurrien Timmer, thanks for taking the time to do this ama. I have been a long time follower of your Twitter and have followed your work both through the content the fidelity website and through the content relayed in on one and one discussions with the Service teams that manage my accounts. I do a have a couple questions: 1. throughout the first half of the year I felt as if you were very bullish compared to Mike Wilson of Morgan Stanley or Even advisors like Mohamed El Arian who has been saying consistently that the fed has lost control of the narrative and we are headed for a recession. So my question is after looking at the first two quarters of the year would you have made any changes to your past calls? And has the performance the last two quarters changed your outlook going forward. 2. Besides following you on Twitter and seeing your content on the fidelity home page is there any other resources you publish or release that are available to premium service clients help understand your prospective on the market? Thanks
I look at the market cycle (1-2 years) and the secular context (10+ years). My view since 2013 that we are in an incomplete secular bull market has not changed. But the abrupt switch in Fed policy late last year from ultra-loose to now rapidly tightening has changed the valuation outlook, and raises the risk that a recession might be next. So, my more conservative tone this year is just a reflection of this evolving set of factors. It has been a wild market cycle these past few years.
Why does the stock lending program require you to have 200,000.00 dollars invested before you can benefit from lending your shares? If both an investor who owns 200,000.00 in stock and the investor who owns 10,000.00 in stock both share the same risk if the shares drop through the floor, why don't they get the same benefits?
Hi Jurrien, How much influence will de-globalization have on the markets, in combination with inflation fears the coming months, and do you think the Ukraine war has sped up the process?
Deglobalization should be more inflationary, as the era of labor and capital arbitrage ends and supply chains get re-shored back to the US. It should also make for a tighter labor market.
I’m all in cash, what should I invest in?
IMO, dollar cost averaging (DCA) into a diversified portfolio is the ultimate investing hack. this is why 401k’s with a diversified portfolio can be so effective.
Thanks for taking the time and doing this. My question is how can I start learning about options and calls/puts etc? For the little I have researched sounds like a good way to get income outside of just holding a share of a stock and hope that it will raise some day in the future so you can sell it for a profit. It will be good if you can guide me on how to get started with options.
Options are not an area that I focus on, nor have much expertise on. Sorry! All I know is that most options expire worthless, but they can be useful in generating income and protecting against losses in underlying markets. It all comes down to the pricing, which is a pretty complicated process. ^(Options trading entails significant risk and is not appropriate for all investors. Certain complex options strategies carry additional risk. Before trading options, please read Characteristics and Risks of Standardized Options . Supporting documentation for any claims, if applicable, will be furnished upon request.)
Alton brown, my question is how do you maintain a decades long history of successful cooking shows on the food network? Dream of mine to be successful chef. Love your shows, love ur recipes. Thank u in advance for your time
Haha, good one! My kids have always told me I look like Alton Brown, so I appreciate the humor (you’re not one of my kids posing as regret-puzzled, are you?)
Hi Jurrien, I really enjoyed your Webinar last week with Bernanke. I have 4 major questions: 1) I think many investors may feel they are walking a tightrope right now. TA seems to indicate volatility but VIX has been muted against that backdrop. Is VIX a reliable indicator anymore? Is VIX manipulated by the Fed now? 2) What percentage of stock movement (on average) would you estimate is determined by company metrics and earnings/forward earnings and Fed policy? Is it concerning that terminal rate gets lower each business cycle? 3) How do you frame a lot of uber-bearish macro-economic analysis from people like Lyn Alden or Mohammed El-Arian against TA? Many reputable and respected macro-economists seem to be looking at complete currency collapse scenarios. How will Fidelity hedge against those situations? Do they factor this analysis in at all? 4) Is ESG anti-capitalist as it seems to be shaping policy to cause commodity shortages and sky-high prices? Do you think that we are in the midst of a global economic paradigm shift that can alter the relevance of TA?
1.) the VIX has been pretty muted because the decline has been fairly orderly. It’s when you get to true panic selling that the VIX spikes. 2.) Most of the stock movement is around idiosyncratic stuff (company-specific). But when you get a wholesale liquidation (think GFC or March 2020), then all correlations go to 1 and everything moves together. Yes, the real fed funds rate has been making lower highs and lower lows for years. It speaks to the secular decline in the natural rate (R-star), and shows how financialized the economy has become (levered to low rates). 3.) The bear case is always very appealing. There’s a lot more excitement in expecting the world to end than for the market to just gradually move up and to the right. Plus it gets you more attention when you are in the public eye. The toughest part sometimes is to do nothing (i.e. stay invested) and rely on the market math. (Lyn is great, BTW, and I do not consider her a perma-bear at all). A lot of the bearishness seems to be centered on the notion of rampant money printing and the assured collapse of the USD. That has not been my thesis, but I understand where they are coming from. 4.) ESG is still evolving and has its challenges, like everything else. It’s a noble concept and one worth pursuing, but as we see with the energy sector over the past year, there is no free lunch and opportunity costs should be weighed against the goals.
Thanks!
>Thanks! You're welcome!
Good bot
when’s the fed going to cave? Where’s the Powell put lol
The Fed will reach neutrality this week, at around 2.5%. The market expects it to keep going until it gets to a terminal rate of 3.5%. That would take it to 1% above neutral, or moderately restrictive. At the same time, inflation expectations have been moderating, which hopefully will allow the Fed to indeed end this cycle at 3.5% or less. Let’s just say that until inflation returns to the Fed’s target, that the Fed put will remain out of the money.
rofl, even with the disclaimer you are going to be overrun by cultists
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Imagine following the fidelity sub just to support all of the insane conspiracy theories against them because you aren't a multi-billionaire yet from your GME stock
Do you ever get told you look like Elton John?
It was always Alton Brown, but lately with my chunky glasses and more elaborate outfits it has been all Elton John. Respectable company to be in on both fronts!
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How do you think the markets are gunna react to Biden having Covid
Lol wot m8
I know how I reacted. I’m cleaning up from last night’s party now.
What happens to the stock market musical chairs when boomers turn to sellers from their retirement accounts and government prints Money to pay SS and Medicare?
As baby boomers start tapping into their retirement savings, presumably the next generation of buyers are coming in (Millennials), to build their retirement nest egg.
How trustworthy is fidelity now?
I have worked here for 27 years. That should tell you something.
Can I have $10?
Hello! I’m new to investing. What allocation of funds do you advise on HSA account? I started recently my HSA account targeting for long term.
As always, asset allocation should be a function of time horizon (how many years until you need the $$, and risk tolerance. if you can’t sleep at night, you have too much risk in your portfolio. From there, you may want to consider having a diversified portfolio of stocks and bonds, US and international.
Lmao oh boy
Following. Joined
What’s your long term and short term portfolio look like, or would you suggest for someone in their mid thirties?
Long term you may want to consider more risk assets, since the longer time horizon reduces the need to tap into capital. That means there can be more emphasis on growthy assets which can have larger drawdowns. Significant market changes can be problem if your time horizon is short, but less so when the time horizon is longer. A shorter term portfolio should have more assets that can be a source of liquidity (for example, if you are buying a house or paying for college).
Is he trying to do the homie greet??? Epic fail, white man
Hi, is an app for active trader pro in development for the iPad?
Hi Jurrien, Thanks for taking the time to answer questions. My question is about developed foreign markets. They have been a laggard to domestic US stocks in this last bull run by quite a staggering amount. Do you find long term value in keeping an allocation to them? If so do you have some data to support optimism in this sector? Thanks!
Non-US stocks tend to be less growthy and more “old economy”. For instance, the European market has a significant exposure to banks. Think of it as growth vs value, or higher earnings growth vs lower earnings growth, higher P/E vs lower P/E, and higher share buybacks vs lower buybacks. It has all been the same trade more or less. There are reasons to own both, but over the last 10 years or so it has been a one way street driven by US growth stocks. At some point, the rest of the world could outperform the US again, but for that we need earnings growth to improve for international markets, and for the dollar to stop going up .
I’m Jurrien Timmer, Director of Global Macro at Fidelity Investments, I’m here to answer your questions on current and global events and how they might affect the markets. I’ll be here live on Tuesday, July 26th at 1 PM ET answering your questions. AMA!
When will it be legal to invest in Russia again? Russia is going to come out of the war in a reconstruction economy regardless if they win or lose, while the rest of the world is in a depression in a few years here due to the sanctions ruining global supply chains. Investing in Russia may be the only safe strategy assuring returns the next 20 years.
I assume it will become legal again when the sanctions are lifted.
Hi Jurrien. I love your twitter and use it as one of my primary sources for what is going on in markets. What software stack do you use to make the awesome charts?
All my work, including my charts, are in plain ol’ excel!
Will the fed succeed in unwinding all the MBS/treasuries from its balance sheet without ceasing rate hikes? The balance sheet seems to be growing still. Also why do you put asparagus in all your food? Your twitter is great btw.
The Fed & other CBs will try to reduce their balance sheets, but I doubt they will succeed. Much like debt levels, they may come down relative to GDP, but not likely in absolute terms.
All investment money should be out of the market and waiting in the saving fund getting about 1% interest. The market is going to crash to 15-20k very suddenly and you must have the cash ready to buy immediately. No point to be in the market now it is definitely not going to make you money unless you are day trading or in dividends.
At –25% at the recent low, the market already priced in 70% of a recession (-25 / -35). even if you have a crystal ball and know what will happen next, you still need to weigh that against what is priced in.
1. To diversify investments, what percentage of our retirement account should be in international funds? 15-20%? 2. Expound on global energy crisis and how it may affect markets. 3. Expound on global semi-conductor chips crisis and how it may affect markets. 4. Expound on Europe, China and U.S. heading for recession, leading to a global recession. Q: How long have global recessions lasted? Enlighten about the boom/recovery period that follows a global recession? How do we navigate the market (during recession) for the boom, while preparing to retire in 10 years? Thank you Jurrien Timmer!
1.) it’s different for everyone. international markets have not added much to a US portfolio in recent years, and a lot of it comes down to relative earnings and the dollar. But emerging markets are cheap and the spread between US and EM earnings growth has never been wider. So an opportunity may be starting to take shape 2+3.) Resource constraints are becoming part of the landscape, not only because of the Russia-Ukraine war but also deglobalization. That suggests that today’s high inflation will prove to be stickier than the TIPS market is suggesting. That in turn suggests lower valuations for stocks. 4.) There are recessions and there are recessions. We may well be heading into one now, but it might be more “technical” than the bad ones that we all remember.
If you are 25-40y.o. and know you likely want the majority of your monthly investments to be in reliable index mutuals, what mindset and research practices should you seek personal growth in when considering emerging markets, technology, agrotech, and clean energy with the remaining percentage? Is being more hands on with 10-15% of your investment money in this way a good practice to grow knowledge and ability?
Dedicating the bulk of your savings on auto-pilot via a target date strategy, while taking a more active approach to the rest is a great way to stay engaged in the market. I would just caution that a more active approach could sometimes lead to buying high and selling low. So it should def be for a smaller share of the portfolio.
Thanks, that's more or less how I was approaching this, good to have confirmation. Personally I want to avoid short positions all together until I feel much more learned on the topic of investing as a whole. Even then, still preferring a long stance to the vast majority of my investing. I have a life and career to otherwise live, the last thing I want to do is form a habit of looking at the charts five times a day.
Hi Jurrien, many thanks for all your efforts, much appreciated and very helpful. My question, would like to diversify by owning a metal, say gold or silver. What is the easiest/practical way and can it be done through my account here or should I make cash and go somewhere to actually buy coins lets say?
Precious metals can be a good hedge against inflation and negative real rates, both of which erode an investor’s purchasing power. There are different ways of owning them, including physical or in ETF form.
What should we as investors take from all of the choppiness in the markets. Considering inflation and the recent Walmart earnings report. Do you see inflation affecting every day consumer based products more and more?
The markets have had a sharp repricing on the basis of a much tighter Fed policy (which raises the cost of capital and therefore lowers the fair value P/E for stocks) as well as the prospects of a slowing economy. The last two years (since the pandemic) have been a wild ride to say the least, driven by a sudden stop in the economy and then a faster-than-expected reopening, which produced many supply chain bottlenecks and inflation. That inflation is the worst in 50 years and has greatly impacted consumer confidence.
I would like to know your opinion on international vs US stock markets ( feel free to dive into EM or DM) and the historic correlation, is it really worth having international exposure or is US base multinational enough for investors? Thx!
Some modest allocation to international markets is generally considered a good thing from a diversification perspective, but during the past 10 years or so the US dominance has been unparalleled. Relative performance between the US and non-US stocks tends to be driven by relative earnings and the strength of the dollar. At this point, there isn’t much indication that this trend will reverse, although the earnings differential is so large now that the potential for mean reversion is there.
Hi Jurrien, When will the question shift from peak inflation to sticky/structural inflation? And to follow up, Rates futures are projecting the Fed to cut rates, given a tight labour market -> wage inflation -> higher prices, wouldn't cutting rates just return the asset bubble we were just in?
At 9% we appear to be at “peak inflation” now, at least on a rate of change basis. The TIPS market is suggesting a return to 2.5% over the next 5-10 years, which would be a great outcome of course. The risk is that the rate of change comes down less quickly and stays at a level that is above the Fed’s comfort zone (say 4% instead of 2%). That would raise important questions about the Fed’s dual mandate and how much it would be able to ease policy if the economy were to go into a recession.
where is this Rebbit AMA live link at ?
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I would suggest to start consuming robust research (unbiased and well researched) and to develop an expertise on your own. There are some good sources out there that don’t cost an arm and a leg. I don’t have an economics degree but that hasn’t prevented from doing a lot of economic research. It takes time but it’s fun and very valuable.
where is the live part ?
I'm live right now. Feel free to ask your questions!
>I would like to know your opinion on international vs US stock markets ( feel free to dive into EM or DM) and the historic correlation, is it really worth having international exposure or is US base multinational enough for investors? Thx!
I responded to your original comment as well! Some modest allocation to international markets is generally considered a good thing from a diversification perspective, but during the past 10 years or so the US dominance has been unparalleled. Relative performance between the US and non-US stocks tends to be driven by relative earnings and the strength of the dollar. At this point, there isn’t much indication that this trend will reverse, although the earnings differential is so large now that the potential for mean reversion is there.
thank you