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Time of India
23-05-2025
- Business
- Time of India
Nifty surges 300 points as investor sentiment lifts markets. Will the rally last?
Despite a 300-point rally in the Nifty on Friday, Indian stock markets largely lacked clear direction over the week. However, experts remain optimistic about the market's prospects, citing resilience in the face of geopolitical tensions and tariff-related uncertainties. They anticipate the Nifty could deliver a strong outperformance, with potential gains of 12–15% going forward. Prachi Deuskar, smallcase Manager and Co-Founder, Lotusdew, believes a 12%-15% growth is realistic in the current context. 'In Q4FY25, India's domestic demand recovery gained momentum, driven by strong rural consumption, favourable crop yields, and supportive government initiatives,' she said. In her view, all equities are expected to outperform other asset classes. The Indian markets shrugged tariff-related uncertainties following a pause announced by US President Donald Trump on April 7, just after a week of their implementation. Global markets, including India, benefited from the move with Nifty rising by 10% in the same period. "Indian markets which were on the receiving end from past few months on FII selling, have shown a sharp rebound with 10% NIFTY returns in the past 6 weeks. 4Q25 results so far show better than expected corporate performance with EBITDA and PBT beat of 5.1/9.2% (Ex Oil & Gas) respectively," Prabhudas Lilladher said in a note. Commenting on the current trends, Pankaj Murarka, CIO at Renaissance Investment, said that he has consistently maintained that we are in a bull market. "My simple definition of a bull market, drawn from the original Dow Theory, is that markets deliver positive returns on a full-year basis. I still firmly believe markets will yield positive returns on an annualised basis. That said, I've also been highlighting that this is a mature bull market—we're now in the sixth year since it began, right around the onset of the COVID-driven lockdowns," he said. He said that India is arguably the best-placed market in the world today and believes earnings growth will recover starting this year, with Nifty potentially delivering low double-digit earnings growth, and markets generating similar returns. After remaining net sellers for the January-March quarter, tables have turned in favour of the Indian equities. The FIIs bought equities worth Rs 19,272 on a month-to-date basis following a modest Rs 4,223 crore purchase in April. However, the constructive stance of experts is not without caution. Prabhiudas said that markets now seem to have digested the uncertainty related to global tariff wars on hopes of lesser disruption and trade agreements by major economies. It pointed out worries related to the Chinese economy and US interest rates, arguing that an end to global turmoil is still not in sight. What to do? "Our view on markets remains constructive. However, investors will need to be selective—picking the right sectors and stocks is crucial. At the index level, returns are likely to be in the high single digits to low double digits, which is still quite healthy for a mature bull market at this stage of the cycle," Murarka said. Srivastava of Dimensions Corporate said that investors were buying stocks left, right and centre at PE above 50, which is worrying. "One should enjoy the ride, but be careful that you are not the one left in the party standing when the music stops and that is the crucial point here that in this environment you got to be very stock specific," he said.
Economic Times
23-05-2025
- Business
- Economic Times
India in a mature bull market, still poised for positive returns: Pankaj Murarka
While our exposure is currently limited, we believe some of these platforms could emerge as the next generation of large-scale consumer companies. "Over the past five years, many of the low-hanging fruits have already been harvested. Significant money has been made, and valuations are now expensive. In fact, India is currently the most expensive market globally," says Pankaj Murarka, CIO, Renaissance Investment. Firstly, help us understand your outlook. What are you really pencilling in for the markets? Lately, a lot has been happening globally—we're in the midst of tariff uncertainty and its potential implications on businesses. However, back home, some macro indicators seem to be faring well. What's your sense of the Indian markets, and where do you see us heading from here? Pankaj Murarka: I've consistently maintained that we are in a bull market. My simple definition of a bull market, drawn from the original Dow Theory, is that markets deliver positive returns on a full-year basis. I still firmly believe markets will yield positive returns on an annualised basis. That said, I've also been highlighting that this is a mature bull market—we're now in the sixth year since it began, right around the onset of the COVID-driven lockdowns. Over the past five years, many of the low-hanging fruits have already been harvested. Significant money has been made, and valuations are now expensive. In fact, India is currently the most expensive market globally. We must also acknowledge that we're experiencing a cyclical slowdown—partly due to domestic factors and partly due to global trade headwinds. Yet, India is arguably the best-placed market in the world today. I still believe earnings growth will recover starting this year, with Nifty potentially delivering low double-digit earnings growth, and markets generating similar returns. So yes, our view on markets remains constructive. However, investors will need to be selective—picking the right sectors and stocks is crucial. At the index level, returns are likely to be in the high single digits to low double digits, which is still quite healthy for a mature bull market at this stage of the cycle. What are you doing with your internet stocks? Pankaj Murarka: To be honest, we've booked some profits. What began as a highly contrarian, fear-driven trade has now turned euphoric. Valuations in some of the companies we liked are now pricing in growth too far into the future. The key with internet stocks is the ability to identify strategic winners over the next 5–10 years. In my view, the top two or three players in any segment will generate 130–140% of the industry's profits—implying the rest will lose money. So, picking the right winner, and at the right valuation, is critical. For example, take Zomato in the food delivery space. At ₹50, we saw significant profit potential and felt the stock was mispriced. Today, it appears to be pricing in too much future growth. While Zomato remains a category leader and should do well over the medium term, I don't expect much near-term upside in its stock price over the next 12–18 months. Since we manage clients' money, our investment horizon is 2–3 years. Strategically, I remain very positive on the internet space, but yes, we have partially exited some positions. Assuming that earnings growth will be good—but not extraordinary—and that finding companies growing even at 15% might be tough, how would you build a portfolio for the next three years? Specifically, one comprising companies with 15–20% top-line and 15–25% bottom-line growth, but whose valuations aren't overly stretched. Pankaj Murarka: Absolutely. You've hit the nail on the head. While aggregate earnings growth is likely to remain in the low double digits, there are pockets across sectors where growth is stronger. The key is to find reasonably valued companies within those areas. Take EMS (electronics manufacturing services) companies—they're growing fast, but are already priced to perfection. Instead, I prefer slightly lower growth—mid to high teens—if valuations are more reasonable. What matters to investors is actual returns, and you can achieve strong returns even with moderate earnings growth if you enter at the right it comes down to business models and management execution. Companies with strong execution at a strategic level can deliver outlier growth despite headwinds. To answer your question, there are three broad buckets we like:First, large banks. We own the top four private sector banks in India. These stocks are trading at a discount to the Nifty and offer reasonable valuations. They are capable of delivering mid- to high-teens CAGR returns over the next three years. So, this remains a core portfolio consumer and consumer-oriented stocks. Over the last six months, we've pivoted towards this space. These stocks underperformed over the past five years, but valuations are now back in line with long-term averages. With a likely revival in consumption, we're focusing on companies driving both organic and inorganic growth—those with strategies to outperform industry internet companies. Despite some profit-taking, we still hold names in this space. Select internet companies can grow 25–30% CAGR over the next 5–7 years and are reasonably valued. So, they remain part of our portfolio. In summary, these three buckets should help generate high-teens portfolio-level returns—an excellent outcome in a market cycle like this, with moderate risk. Now that you've sketched the broader picture, let's fill in the details. Within those three buckets, what are your top holdings or ideas? Pankaj Murarka: Starting with large banks, we own HDFC Bank—we've re-entered after a gap of three years. Post-merger, the bank had a period of consolidation and was underperforming industry growth. Now, we expect it to regain industry-leading growth within the next four quarters. We also own Kotak Mahindra Bank, and ICICI Bank remains a core holding given its strong execution. In the consumer segment, we have exposure across staples and discretionary. Among staples, we own Tata Consumer and Godrej Consumer. These companies are expanding into new categories and making strong organic and inorganic investments to drive growth. For context, India's private final consumption expenditure (PFCE) is $2.6 trillion, higher than the GDP of the 10th largest economy, and growing at 10–12% annually. Companies with strong strategies and execution can capture a larger share of this consumer discretionary, we own Jubilant FoodWorks. We believe pizza, as an organised category in India, remains underpenetrated with a long runway for growth. We also hold names in consumer durables, where penetration is still low. Companies that can execute well on the ground have the potential to deliver strong mid- to high-teens growth. In the internet space, we continue to hold Paytm and Info Edge. We have a smaller holding in Zomato, having booked some profits. We are also evaluating new-age internet and consumer tech companies like Nykaa and FirstCry. While our exposure is currently limited, we believe some of these platforms could emerge as the next generation of large-scale consumer companies.
Time of India
23-05-2025
- Business
- Time of India
India in a mature bull market, still poised for positive returns: Pankaj Murarka
"Over the past five years, many of the low-hanging fruits have already been harvested. Significant money has been made, and valuations are now expensive. In fact, India is currently the most expensive market globally," says Pankaj Murarka , CIO, Renaissance Investment . Firstly, help us understand your outlook. What are you really pencilling in for the markets? Lately, a lot has been happening globally—we're in the midst of tariff uncertainty and its potential implications on businesses. However, back home, some macro indicators seem to be faring well. What's your sense of the Indian markets, and where do you see us heading from here? Pankaj Murarka: I've consistently maintained that we are in a bull market. My simple definition of a bull market, drawn from the original Dow Theory, is that markets deliver positive returns on a full-year basis. I still firmly believe markets will yield positive returns on an annualised basis. That said, I've also been highlighting that this is a mature bull market—we're now in the sixth year since it began, right around the onset of the COVID-driven lockdowns. Over the past five years, many of the low-hanging fruits have already been harvested. Significant money has been made, and valuations are now expensive. In fact, India is currently the most expensive market globally. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like War Thunder - Register now for free and play against over 75 Million real Players War Thunder Play Now Undo We must also acknowledge that we're experiencing a cyclical slowdown—partly due to domestic factors and partly due to global trade headwinds. Yet, India is arguably the best-placed market in the world today. I still believe earnings growth will recover starting this year, with Nifty potentially delivering low double-digit earnings growth, and markets generating similar returns. So yes, our view on markets remains constructive. However, investors will need to be selective—picking the right sectors and stocks is crucial. At the index level, returns are likely to be in the high single digits to low double digits, which is still quite healthy for a mature bull market at this stage of the cycle. What are you doing with your internet stocks? Pankaj Murarka: To be honest, we've booked some profits. What began as a highly contrarian, fear-driven trade has now turned euphoric. Valuations in some of the companies we liked are now pricing in growth too far into the future. The key with internet stocks is the ability to identify strategic winners over the next 5–10 years. In my view, the top two or three players in any segment will generate 130–140% of the industry's profits—implying the rest will lose money. So, picking the right winner, and at the right valuation, is critical. For example, take Zomato in the food delivery space. At ₹50, we saw significant profit potential and felt the stock was mispriced. Today, it appears to be pricing in too much future growth. While Zomato remains a category leader and should do well over the medium term, I don't expect much near-term upside in its stock price over the next 12–18 months. Since we manage clients' money, our investment horizon is 2–3 years. Strategically, I remain very positive on the internet space, but yes, we have partially exited some positions. Live Events Assuming that earnings growth will be good—but not extraordinary—and that finding companies growing even at 15% might be tough, how would you build a portfolio for the next three years? Specifically, one comprising companies with 15–20% top-line and 15–25% bottom-line growth, but whose valuations aren't overly stretched. Pankaj Murarka: Absolutely. You've hit the nail on the head. While aggregate earnings growth is likely to remain in the low double digits, there are pockets across sectors where growth is stronger. The key is to find reasonably valued companies within those areas. Take EMS (electronics manufacturing services) companies—they're growing fast, but are already priced to perfection. Instead, I prefer slightly lower growth—mid to high teens—if valuations are more reasonable. What matters to investors is actual returns, and you can achieve strong returns even with moderate earnings growth if you enter at the right price. Ultimately, it comes down to business models and management execution. Companies with strong execution at a strategic level can deliver outlier growth despite headwinds. To answer your question, there are three broad buckets we like: First, large banks. We own the top four private sector banks in India. These stocks are trading at a discount to the Nifty and offer reasonable valuations. They are capable of delivering mid- to high-teens CAGR returns over the next three years. So, this remains a core portfolio segment. Second, consumer and consumer-oriented stocks. Over the last six months, we've pivoted towards this space. These stocks underperformed over the past five years, but valuations are now back in line with long-term averages. With a likely revival in consumption, we're focusing on companies driving both organic and inorganic growth—those with strategies to outperform industry averages. Third, internet companies. Despite some profit-taking, we still hold names in this space. Select internet companies can grow 25–30% CAGR over the next 5–7 years and are reasonably valued. So, they remain part of our portfolio. In summary, these three buckets should help generate high-teens portfolio-level returns—an excellent outcome in a market cycle like this, with moderate risk. Now that you've sketched the broader picture, let's fill in the details. Within those three buckets, what are your top holdings or ideas? Pankaj Murarka: Starting with large banks, we own HDFC Bank—we've re-entered after a gap of three years. Post-merger, the bank had a period of consolidation and was underperforming industry growth. Now, we expect it to regain industry-leading growth within the next four quarters. We also own Kotak Mahindra Bank , and ICICI Bank remains a core holding given its strong execution. In the consumer segment, we have exposure across staples and discretionary. Among staples, we own Tata Consumer and Godrej Consumer. These companies are expanding into new categories and making strong organic and inorganic investments to drive growth. For context, India's private final consumption expenditure (PFCE) is $2.6 trillion, higher than the GDP of the 10th largest economy, and growing at 10–12% annually. Companies with strong strategies and execution can capture a larger share of this growth. In consumer discretionary, we own Jubilant FoodWorks. We believe pizza, as an organised category in India, remains underpenetrated with a long runway for growth. We also hold names in consumer durables, where penetration is still low. Companies that can execute well on the ground have the potential to deliver strong mid- to high-teens growth. In the internet space, we continue to hold Paytm and Info Edge. We have a smaller holding in Zomato, having booked some profits. We are also evaluating new-age internet and consumer tech companies like Nykaa and FirstCry. While our exposure is currently limited, we believe some of these platforms could emerge as the next generation of large-scale consumer companies.
Yahoo
18-03-2025
- Business
- Yahoo
Hiltzik: Most of what you've heard about the stock market's gyrations is wrong, probably
With the stock market experiencing gyrations that haven't been seen in, well, months, investors are fretting about the future of their portfolios and the prospects of a recession triggered by Donald Trump's will-he-or-won't-he follow through with his tariff threats. This isn't the place to come for advice on how to trade the stock market. When I scan the market prognostications coming to me via email and the investment websites I regularly visit, I find that they fall into two equally balanced categories: Those counseling, "Don't worry, be happy"; and those forecasting a cataclysmic crash, or at least a recession bulking large on the horizon. Since that's what I usually hear whether the market is on a bull tear or a slump, I am reminded of the observation that William Goldman, the Oscar-winning screenwriter of "The Princess Bride" and "Butch Cassidy and the Sundance Kid," made about Hollywood: "Nobody knows anything." Sell down to the sleeping point. J.P. Morgan's advice to a friend who said he was so nervous about his stocks that he couldn't sleep at night That said, it may be useful to place the most recent stock market action in perspective. We can start with volatility of recent days and weeks. On Monday, Mar. 10, the Dow Jones industrial average fell 890 points, or 2.8%; the broader Standard & Poor's 500 index fell by 2.7% and the Nasdaq composite index, which tracks tech stocks, fell 4%. The day before, Trump had refused to rule out that his economic policies might produce a recession. The market's sentiment was sour all week. On Thursday, the S&P 500 entered "correction" territory — a 10% drop from its recent high, which in this case had been recorded Feb. 19. The pullback inspired some market commentators to dust off an antique market indicator known as the Dow Theory. That indicator posits that any move in the Dow Industrials must be matched by a similar move in the Dow transportation index. Both were falling last week, "deepening fears of a broader market correction," wrote James Gordon of the Daily Mail. Yet whether the Dow Theory is relevant to today's economy is questionable. It was coined at the turn of the last century, when industrial output was in heavy machinery and physical goods that had to be shipped by the railroad companies dominating the transportation sector. Today, more than one-third of the 30 companies in the Dow industrials deal in finance, insurance or high-tech and don't make products that need to be physically transported. Read more: Hiltzik: Bitcoin, NFTs, SPACs, meme stocks — all those pandemic investment darlings are crashing In any event, Friday brought a relief rally, with the Dow rising 674.62 points, or 1.7%, the S&P 500 rising 2.1% and the Nasdaq rising 2.6%. That wasn't enough to erase the full week's losses, but it was followed by another surge Monday, when the Dow rose by 353.44 points, or 0.85%, the S&P by 0.64% and the Nasdaq by 0.31%. None of this means that the downdraft that has pared the Dow by 1.65%, the S&P by 3.5% and the Nasdaq by 7.8% so far this year won't resume or get worse. But it points to the inadequacy of tracking the stock market by short-term moves. Market commentators typically advise investors to hang tough during periods of volatility like this one. That has been sound advice historically, though isn't equally sound for everyone. It works better for those with more distant horizons, such as households at the start of or midway into their earning years, which have more time to capture the long-term growth in stock prices and to recover from the inevitable periodic downturns. For those in or near retirement, the environment may look more worrisome. A 65-year-old who was counting on a stock portfolio to see him or her into an impending retirement in 2023 had to confront a stock market pullback of nearly one-fifth in 2022 — enough to force many such households to reconsider their retirement options. Politicians who try to reassure voters and investors about a market downturn often sound as though they're sugarcoating the downside of their own policies, but that doesn't always mean they're wrong. Trump's Treasury secretary, Scott Bessent, walked into that buzzsaw Sunday on NBC's "Meet the Press," when he declared, "Corrections are healthy. They're normal. What's not healthy is straight up, that you get these euphoric markets. That's how you get a financial crisis." Axios reported that with these remarks, Bessent, a veteran Wall Street executive, "broke with orthodoxy." Actually, his view of corrections was entirely consistent with Wall Street orthodoxy. His implication that "euphoric markets" invariably produce financial crises, however, is questionable — markets can sustain their euphoria for years without provoking anything like a crisis. Former Fed Chair Alan Greenspan warned of the stock market's "irrational exuberance" in 1996, but even despite the pricking of the dot-com bubble in 2000, a financial crisis didn't occur until 2008, a full 12 years after Greenspan's remark — and it was triggered by an overheated housing market, not the stock market. Anyway, Bessent's remark has been viewed as a tone-deaf defense of Trump's unpopular economic policies. Read more: Hiltzik: Millions of Americans are fixated on stock prices. They shouldn't pay such close attention The same phenomenon greeted President Nixon's declaration in May 1970 that "if I had any money I'd be buying stocks right now.' Coming as it did in the teeth of a 17-month bear market (the longest and steepest since World War II) and during a recession that had started the previous December, it looked as if he was trying to rescue his reputation as a steward of the U.S. economy. But he was prescient: The market turned in positive returns in seven of the next 10 years, and embarked on a record-breaking bull run that may not yet have run its course. As I wrote recently, a propos of whether White House insiders might be playing the market by front-running Trump's announcements his plans to impose, or withdraw, tariffs, it's dangerous to attribute stock market moves to news developments. That may be true especially given Trump's tendency to announce policies that don't get implemented. My favorite stock market commentator, asset manager Barry Ritholtz, urges his followers to "tune out the noise, turn off the TV, and avoid the trolling, wild gesticulations, and chaos" produced by Trump. "Instead, focus on what is truly happening." The tariffs on Canadian and Mexican goods are a moving target, and mostly haven't been implemented, Ritholtz points out. Elon Musk's claims for mass layoffs and sharp budget cutting by his DOGE operation have been wildly overstated. Among the policies likeliest to actually happen, in Ritholz's view, are an extension of the tax cuts Trump signed in 2017, which favored corporations and the wealthy, and a Federal Trade Commission that looks kindlier on big mergers than did Biden's FTC. It's fair to expect that Trump's policies will have an effect on economic growth, including in California. A favorite insight by economists and business leaders is that what he's done so far is inject "uncertainty" into economic planning. Read more: Hiltzik: GameStop isn't the first stock market mania, and it won't be the last Of course, the future is always uncertain. Back in 2010, when Republicans complained that the "uncertainty" produced by Barack Obama's developing plans for tax, healthcare and financial reforms had business leaders sheltering in terror under their beds, I observed that the U.S. spent three decades facing the threat of nuclear annihilation from the Soviet Union. That was uncertainty, and it hovered over the most prosperous period in our history. We may be at the peak uncertainty stage of the current Trump term. Referring to the dithering over tariffs, the U.S. Chamber of Commerce quotes a member fretting that 'the threats and uncertainty have made it hard to make business decisions." Earlier this month, Clement Bohr of the UCLA Anderson economic forecast noted that "at this level of uncertainty, firms stop hiring. They're going to wait it out." That suggests that the waiting period will last only until the picture of Trump's policies becomes clearer (assuming that it will in time). The stock market, after all, is a mechanism to gauge future expectations. No one can be sure, however, how far it is looking ahead — only that it generally looks further ahead than tomorrow. Almost everyone with a stock or bond portfolio has a different mental picture of what they want to accomplish with their investments, if not how to get there. How much risk are you willing to take? What do you want the money for? How long is your investment horizon? J.P. Morgan was impatient with acquaintances who wished to compress all these considerations into a single all-purpose maxim. Told by a friend that he was so worried about his stocks that he couldn't sleep at night. He asked, what should he do? Morgan's reply may be apocryphal, but it encompasses the truism that investors should divorce their emotional response to the markets from the cold analysis that should underlie investment decisions, if possible. According to the story, Morgan replied, "Sell down to the sleeping point." Get the latest from Michael HiltzikCommentary on economics and more from a Pulitzer Prize me up. This story originally appeared in Los Angeles Times. Sign in to access your portfolio
Los Angeles Times
18-03-2025
- Business
- Los Angeles Times
Most of what you've heard about the stock market's gyrations is wrong, probably
With the stock market experiencing gyrations that haven't been seen in, well, months, investors are fretting about the future of their portfolios and the prospects of a recession triggered by Donald Trump's will-he-or-won't-he follow through with his tariff threats. This isn't the place to come for advice on how to trade the stock market. When I scan the market prognostications coming to me via email and the investment websites I regularly visit, I find that they fall into two equally balanced categories: Those counseling, 'Don't worry, be happy'; and those forecasting a cataclysmic crash, or at least a recession bulking large on the horizon. Since that's what I usually hear whether the market is on a bull tear or a slump, I am reminded of the observation that William Goldman, the Oscar-winning screenwriter of 'The Princess Bride' and 'Butch Cassidy and the Sundance Kid,' made about Hollywood: 'Nobody knows anything.' That said, it may be useful to place the most recent stock market action in perspective. We can start with volatility of recent days and weeks. On Monday, Mar. 10, the Dow Jones industrial average fell 890 points, or 2.8%; the broader Standard & Poor's 500 index fell by 2.7% and the Nasdaq composite index, which tracks tech stocks, fell 4%. The day before, Trump had refused to rule out that his economic policies might produce a recession. The market's sentiment was sour all week. On Thursday, the S&P 500 entered 'correction' territory — a 10% drop from its recent high, which in this case had been recorded Feb. 19. The pullback inspired some market commentators to dust off an antique market indicator known as the Dow Theory. That indicator posits that any move in the Dow Industrials must be matched by a similar move in the Dow transportation index. Both were falling last week, 'deepening fears of a broader market correction,' wrote James Gordon of the Daily Mail. Yet whether the Dow Theory is relevant to today's economy is questionable. It was coined at the turn of the last century, when industrial output was in heavy machinery and physical goods that had to be shipped by the railroad companies dominating the transportation sector. Today, more than one-third of the 30 companies in the Dow industrials deal in finance, insurance or high-tech and don't make products that need to be physically transported. In any event, Friday brought a relief rally, with the Dow rising 674.62 points, or 1.7%, the S&P 500 rising 2.1% and the Nasdaq rising 2.6%. That wasn't enough to erase the full week's losses, but it was followed by another surge Monday, when the Dow rose by 353.44 points, or 0.85%, the S&P by 0.64% and the Nasdaq by 0.31%. None of this means that the downdraft that has pared the Dow by 1.65%, the S&P by 3.5% and the Nasdaq by 7.8% so far this year won't resume or get worse. But it points to the inadequacy of tracking the stock market by short-term moves. Market commentators typically advise investors to hang tough during periods of volatility like this one. That has been sound advice historically, though isn't equally sound for everyone. It works better for those with more distant horizons, such as households at the start of or midway into their earning years, which have more time to capture the long-term growth in stock prices and to recover from the inevitable periodic downturns. For those in or near retirement, the environment may look more worrisome. A 65-year-old who was counting on a stock portfolio to see him or her into an impending retirement in 2023 had to confront a stock market pullback of nearly one-fifth in 2022 — enough to force many such households to reconsider their retirement options. Politicians who try to reassure voters and investors about a market downturn often sound as though they're sugarcoating the downside of their own policies, but that doesn't always mean they're wrong. Trump's Treasury secretary, Scott Bessent, walked into that buzzsaw Sunday on NBC's 'Meet the Press,' when he declared, 'Corrections are healthy. They're normal. What's not healthy is straight up, that you get these euphoric markets. That's how you get a financial crisis.' Axios reported that with these remarks, Bessent, a veteran Wall Street executive, 'broke with orthodoxy.' Actually, his view of corrections was entirely consistent with Wall Street orthodoxy. His implication that 'euphoric markets' invariably produce financial crises, however, is questionable — markets can sustain their euphoria for years without provoking anything like a crisis. Former Fed Chair Alan Greenspan warned of the stock market's 'irrational exuberance' in 1996, but even despite the pricking of the dot-com bubble in 2000, a financial crisis didn't occur until 2008, a full 12 years after Greenspan's remark — and it was triggered by an overheated housing market, not the stock market. Anyway, Bessent's remark has been viewed as a tone-deaf defense of Trump's unpopular economic policies. The same phenomenon greeted President Nixon's declaration in May 1970 that 'if I had any money I'd be buying stocks right now.' Coming as it did in the teeth of a 17-month bear market (the longest and steepest since World War II) and during a recession that had started the previous December, it looked as if he was trying to rescue his reputation as a steward of the U.S. economy. But he was prescient: The market turned in positive returns in seven of the next 10 years, and embarked on a record-breaking bull run that may not yet have run its course. As I wrote recently, a propos of whether White House insiders might be playing the market by front-running Trump's announcements his plans to impose, or withdraw, tariffs, it's dangerous to attribute stock market moves to news developments. That may be true especially given Trump's tendency to announce policies that don't get implemented. My favorite stock market commentator, asset manager Barry Ritholtz, urges his followers to 'tune out the noise, turn off the TV, and avoid the trolling, wild gesticulations, and chaos' produced by Trump. 'Instead, focus on what is truly happening.' The tariffs on Canadian and Mexican goods are a moving target, and mostly haven't been implemented, Ritholtz points out. Elon Musk's claims for mass layoffs and sharp budget cutting by his DOGE operation have been wildly overstated. Among the policies likeliest to actually happen, in Ritholz's view, are an extension of the tax cuts Trump signed in 2017, which favored corporations and the wealthy, and a Federal Trade Commission that looks kindlier on big mergers than did Biden's FTC. It's fair to expect that Trump's policies will have an effect on economic growth, including in California. A favorite insight by economists and business leaders is that what he's done so far is inject 'uncertainty' into economic planning. Of course, the future is always uncertain. Back in 2010, when Republicans complained that the 'uncertainty' produced by Barack Obama's developing plans for tax, healthcare and financial reforms had business leaders sheltering in terror under their beds, I observed that the U.S. spent three decades facing the threat of nuclear annihilation from the Soviet Union. That was uncertainty, and it hovered over the most prosperous period in our history. We may be at the peak uncertainty stage of the current Trump term. Referring to the dithering over tariffs, the U.S. Chamber of Commerce quotes a member fretting that 'the threats and uncertainty have made it hard to make business decisions.' Earlier this month, Clement Bohr of the UCLA Anderson economic forecast noted that 'at this level of uncertainty, firms stop hiring. They're going to wait it out.' That suggests that the waiting period will last only until the picture of Trump's policies becomes clearer (assuming that it will in time). The stock market, after all, is a mechanism to gauge future expectations. No one can be sure, however, how far it is looking ahead — only that it generally looks further ahead than tomorrow. Almost everyone with a stock or bond portfolio has a different mental picture of what they want to accomplish with their investments, if not how to get there. How much risk are you willing to take? What do you want the money for? How long is your investment horizon? J.P. Morgan was impatient with acquaintances who wished to compress all these considerations into a single all-purpose maxim. Told by a friend that he was so worried about his stocks that he couldn't sleep at night. He asked, what should he do? Morgan's reply may be apocryphal, but it encompasses the truism that investors should divorce their emotional response to the markets from the cold analysis that should underlie investment decisions, if possible. According to the story, Morgan replied, 'Sell down to the sleeping point.'
