Checklist - Market bottom
The toughest point about investing in to a recession is timing. Too early, and you watch your investments decline 30-40%, too late and miss a fast and furious 30-40% rally. As a rule, the market will always bottom when things look at their absolute worst. So you will never feel good about your investment timing, because things can always get worse. There's not a lot we can do to overcome this, but we can give ourselves an edge by better understanding the characteristics of a market bottom.
- Central Bank rates are continually being cut.
- High yield credit spreads have stabilized at high levels, or are even just beginning to turn lower.
- PMI & Industrial Production has been in decline for months
- Yield curve (10yr - 1yr) is no longer inverted, and now steepening.
- Market valuation (market cap / GDP) is no longer high.
- Market volatility (VIX) is extremely high.
- Commodity prices (i.e., copper) have stabilized at low levels or have even begun to trend higher.
- Retail investors have been panic selling.
- Listed companies have been raising significant equity to pay debt.
- Listed companies have been cutting dividends
- Bankruptcies are making new headlines
- The luxury market has been obliterated.