State of the Market

[WTFH]

The last four contractor downturns all coincided with stock market downturns.

2001, 2008, 2020, 2022.

The correlation is 100%.

Im not saying one causes the other, just that if something bad enough happens to cause a stock market downturn that thing has always resulted in the contractor market slumping as well.

The correlation may be 100% for you, but you are not all contractors (thankfully)

2001 was a great year for me, plenty of clients doing Euro conversion projects. Some businesses outside the euro zone spent less on contractors in 2001 because they had just blown their budget on Y2k, but that was a minor inconvenience for contractors who were prepared to travel for work.
2008 was another great time for me, several of my clients were centralising their supply chains, I was very busy, as were the groups of contractors I was working with.
2020 was covid, businesses spent less money. The stock market downturn was caused by a global pandemic, which also caused many businesses to pause or stop work as no one was going into offices. But it was also a good time for those of us who could adapt - one of the smoothest go-lives I did was in 2020. I was getting calls from clients who saw that they needed to restructure to move out of the UK as the promised trade deals etc hadn't materialised. Rates were excellent.
2022 I finished a project and walked away when they wanted me back but wouldn't give me a rate rise. Took a couple of months off at the end of the year.

Now if you want to know a bad year, that was 2011. Correlation and causation were the same for me. I was on the bench for 7 months. Cause: Marriage.
I was getting married in early September and was not going to be available for much of the month, so I turned down work in August as it would be unprofessional of me to start something then walk away. I didn't get another role until early 2012.

[jamesbrown]

The last four contractor downturns all coincided with stock market downturns.

2001, 2008, 2020, 2022.

The correlation is 100%.

Im not saying one causes the other, just that if something bad enough happens to cause a stock market downturn that thing has always resulted in the contractor market slumping as well.

In 2009 and 2020 they cut interest to almost zero + QE and they did it fast and it was boom times again within a few months.

It would amazing if they could do that again and not cause inflation. I'm all for it. But inflation was on no ones radar back in 2009 and 2020, but this time they might be a bit more slower and cautious..

Having written that, another major crash and bear market in stocks isn't a certainty, just more likely given recent stock market action.

My SIPP and other investments were melting up until around a week ago. The financial markets were booming. Even the FTSE 100 has staged a lacklustre recovery. How long has the contract market been terrible for you, exactly? Sounds like a pretty poor correlation

[jamesbrown]

I don't know what sector you work in? Maybe HMRC or something like that?

But what is more likely - that most contractors are like you and work in sectors that are not at all affected by economic downturns, or that more work in sectors that are affected? Even public sector can end up cutting costs in a downturn.

Money is not simply "shifted around" in a deleveraging event. When debt is repaid, if new loans are not issued with the proceeds, then money is actually destroyed. This is why during such an event prices accross all asset classes fall in unison because there is deflation of the money supply and the demand for cash to repay debts makes cash itself more valuable.

Honestly, I think this thread over-samples a particular subset of IT workers with commoditised skillsets that have been struggling to get work for at least the last year and have noticed that getting work has become increasingly difficult on each renewal over the last several years. Unfortunately, they haven’t really joined up the dots yet. It has little to do with financial markets, which have been growing robustly, including even the legacy FTSE indexes. It sounds like your woes are correlated with downturns but, also, your woes are correlated with upturns. Hmmm.

[eek]

Honestly, I think this thread over-samples a particular subset of IT workers with commoditised skillsets that have been struggling to get work for at least the last year and have noticed that getting work has become increasingly difficult on each renewal over the last several years. Unfortunately, they haven’t really joined up the dots yet. It has little to do with financial markets, which have been growing robustly, including even the legacy FTSE indexes. It sounds like your woes are correlated with downturns but, also, your woes are correlated with upturns. Hmmm.

I'm not 100% sure of that - my field isn't specialised but it is niche and what I'm seeing is that companies have not been starting new projects over the past x months...

[SussexSeagull]

My longest period out was immediately following the Brexit vote in 2016 but once the market re-organised itself I didn't do too bad during COViD. I seem to recall contractors complaining 2012 was bad due to the disruption of the Olympics but I got a contract in the January that gave me 15 months work and didn't notice it. Conversely I have had time out while the rest of the industry is anecdotal- on here at least - flying.

Global markets and events do play a large part in our fortunes but everyone has their own story. The concerning thing is you literally never hear people say 'I don't know what the fuss is about, I just got extended for six months with an increased rate' or, very rarely, 'I left a contract on Friday and started a new one on Monday' anymore.

[jamesbrown]

I'm not 100% sure of that - my field isn't specialised but it is niche and what I'm seeing is that companies have not been starting new projects over the past x months...

But financial markets haven't been bad over the last 6 months, on the contrary. Over the last week, sure, but that is just an overreaction of some large hedge funds to weaker than expected employment and corporate results coming out of the US, primarily. Most likely, it will be a blip, but there will obviously be a proper crash eventually, we haven't eliminated boom/bust. Anyway, the relationship between financial markets and contracting is what we're arguing about here, and the financial markets haven't been bad at all, post covid. Regardless, it seems that more than one of us posting here has found the financial market downturns to be as lucrative as the upturns, and I'm sure we're not alone.

The current market for general IT skills is more likely to reflect a sustained over-supply of people with the same skillsets and a sustained lack of business investment, particularly in the UK, together with a general move out of contracting supplies to permies with Chapter 10 IR35 (although, it sounds like many of you are struggling to secure permie jobs too). These relationships aren't exactly linear. Again, for anyone who has been struggling fairly consistently for some time, you'd need to explain why you've been struggling through both upturns and downturns in the financial markets. Hint: the financial markets aren't that important and some sectors are way more exposed than others and, even in those sectors, change brings opportunity if you're ready to exploit it.

[willendure]

But financial markets haven't been bad over the last 6 months, on the contrary.

Depends what you mean by financial markets though doesn't it? Yes, stocks have gone up, they often do have a so called "melt-up" right before a crash. Over the last 3 years the bond market has had one of its largest downturns ever. The bond market is something like 10 times the size of the stock market, worldwide. Tried remortgaging recently? Not been at all pleasant for those that have.

Also depends on what you mean by bad. Stocks go up, sounds wonderful. But if the P/E ratio is deteriorating to worse levels than the height of the dotcom era, then its not economic growth, its just pure speculation - pension funds drip feeding the market ever higher - the so called "dumb money". Interest rates have been inverted worldwide in the longest and deepest inversion since... the great depression.

On the surface it all looks ok. Soon as you look under the covers the picture is very different.

[WTFH]

Tried remortgaging recently? Not been at all pleasant for those that have.

You mean that because interest rates are dropping that things are worse off?

I'm not saying you're all doom & gloom, but you're complaining that interest rates are down and that the stock market is up.
The crash that some on here have been predicting for the last 4 years hasn't been the big bad thing, and those with any sense are busy paying off their debts, not borrowing to "invest".

Perhaps you should stick a few million in hedge funds if you're so convinced that in the next 2 weeks interest rates will be 20%, house prices will be at 1970 levels, and all the people who said they were going to leave the UK a few weeks ago actually do.

[willendure]

You mean that because interest rates are dropping that things are worse off?

I'm not saying you're all doom & gloom, but you're complaining that interest rates are down and that the stock market is up.
The crash that some on here have been predicting for the last 4 years hasn't been the big bad thing, and those with any sense are busy paying off their debts, not borrowing to "invest".

Perhaps you should stick a few million in hedge funds if you're so convinced that in the next 2 weeks interest rates will be 20%, house prices will be at 1970 levels, and all the people who said they were going to leave the UK a few weeks ago actually do.

I don't mean very recently, I mean over the last year. The bond market was massacred over the last 3 years, and interest rates went up quite a lot. Its been a shock for people to re-mortgage from 1% to 5%. Yes, much more recently, it looks like rates on 2 year and 5 year fixy mortgages is going down.

I think short term interest rates will likely be cut, possibly back down close to 0%, some time over the next year or so. That is not a good thing BTW, its an emergency measure and will only be done because the economy is cracking up, there is too much debt, and the money supply will be shrinking because of the accelerating de-leveraging. Remember when interest rates were cut to 0.25% in 2008? House prices still fell, even though borowing money was cheaper. Credit conditions were still tightened, people were not enthusiastic about taking on debt, and there is an 18 month lag affect for interest rates to feed through to the real economy.

Hell, it might even be a smart move right now if you are mortgaging to take a tracker floating rate. That is what I did in 2007, 0.19% over the BofE base rate. Started out at around 5% and £250/month, interest only mortgage. By 2009, I was paying £5 a month.

After that, I think long term interest rates will inevitably rise, because we will have inflation that we cannot afford to get under control through monetary policy alone, because the national debt is too high.

[willendure]

Also, let me direct you to the important part of the current narrative, which is what is happening in Japan. The Japanese are big savers, and a lot of debt funding to both governments and corporations has come from the Japanese. It has also come from the so-called "Japanese carry trade", where foreign speculators borrow cheap in Japan, to fund debt driven activities elsewhere. Now that their currency is tanking, and the central bank is raising rates to defend it, this has come quite suddenly to a stop. It is actually a very siginificant event, because the carry trade has been a major source of liquidity for decades.

Note: Major source of cheap funding for corporate debt, no longer available. So no more cheap money to pay for projects, contractors, and so on.

Perhaps when this current crisis develops to the point where we start giving it a name in the press (and therefore people will believe it is real), it might be called "The Japanese Crisis". For now, I am calling it "The Credit Crunchier".