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Why is the stock market rallying when the economy is so bad?

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Re: Why is the stock market rallying when the economy is so bad?

#31

Post by vadym909 »

magicsmoke wrote: post #9

> And as has often been the case in recent years, investors find themselves faced with few attractive alternatives if they opt out of betting on stocks. The problem is so familiar it has its own acronym: TINA, or There Is No Alternative to stocks. Cash: Gets eaten away by inflation. Although the CPI doesn't indicate high inflation it only measures consumer goods. Inflation is there in the price of investments. If you…

I'm surprised the average Americans (the 90%) don't get that they are providing insurance to the 86% wealth of the top 10%, but get almost none of the gains.

Re: Why is the stock market rallying when the economy is so bad?

#32

Post by lazylizard »

cft wrote: post #12

This is the inflation that everyone is afraid of. Since the money has been mostly injected from the top of the society, it has been confined to the asset bubble. If this money filters through to the bottom or there's significant injection directly to the bottom (SBA payment protection, $1200 direct assistance, basic income, etc) then we will see consumer inflation as well

The direct injection to the bottom doesn't even cover what income they've lost since 3 months ago..why would there be inflation?

Re: Why is the stock market rallying when the economy is so bad?

#33

Post by grandridge »

formercoder wrote: post #24
jhallenworld wrote: post #20

Earlier quoted context omitted.

There is much bigger risk of deflation during a depression. Do you really think there will be wage inflation when there is 20% unemployment?

Exactly this is why I don’t understand the folks who think inflation is a purely monetary phenomenon. With demand shocks like this how can we not have deflation?

Inflation comes from over reaction of trying to fight/prevent deflation

Re: Why is the stock market rallying when the economy is so bad?

#35

Post by [deleted] »

QuesnayJr wrote: post #7
godelzilla wrote: post #3

Because the stock market is a pyramid scheme propped up with printing money to enforce rampant inequality? Just a guess. https://www.cnbc.com/2020/03/27/the-feds-balance-sheet-just-...

The bulk of the Fed intervention is in the bond market, particularly Treasuries. They are also increasing their intervention in the exchange rate market. If the Fed was trying to pump up the stock market, wouldn't they buy stocks? Instead it looks like to me the Fed is essentially financing the US government's fiscal stimulus.

[deleted]

Re: Why is the stock market rallying when the economy is so bad?

#36

Post by TAForObvReasons »

chiefalchemist wrote: post #30
bb2018 wrote: post #13

Earlier quoted context omitted.

I agree. Also, I know it is hip to say that Wall Street is short-sighted, but in reality it is one of the the few fields where people routinely think decades at a time. If you run a large pension fund or investment account you were already risk-weighted and if the cash isn't needed for 10+ years you'd much rather own a slice of the world's largest companies ten years from now instead of gold or cash under a mattress.

It's all about risk vs return. Furthermore, in the current environment of high adversity, and increased scarcity there will eventually be innovations. Some of those will translate into products and profits.

The problem is perception. Stocks are increasingly seen as a risk-free play, backstopped by a Fed that will take drastic action if prices fall.

In that world, why bother innovating? Why bother investing in innovation when the risk-free play has a huge positive expected return?

Re: Why is the stock market rallying when the economy is so bad?

#37

Post by jalopy »

jonathanpeterwu wrote: post #22

Worth reading all chapters that are in here, but chapter 3 gets at the meat of where we're heading. We're at the end of a long credit cycle post WWII, dislocation of the dollar from the gold standard, to bretton woods, to now QE printing of money being loaned to the government by the fed. Market reflects the cash flow available being printed by the FED to keep the markets up. https://www.principles.com/the-changing-w…

Don't see a chapter 3?

Re: Why is the stock market rallying when the economy is so bad?

#38

Post by Dumblydorr »

How about because big companies are propped up by the government and would always get bailed out? The economy is stacked towards big players, who have power to lobby and get favorable regulations. Therefore, good times or bad, big companies will get paid by Uncle Sam or by all of us, or both.

Re: Why is the stock market rallying when the economy is so bad?

#39

Post by kitotik »

QuesnayJr wrote: post #7
godelzilla wrote: post #3

Because the stock market is a pyramid scheme propped up with printing money to enforce rampant inequality? Just a guess. https://www.cnbc.com/2020/03/27/the-feds-balance-sheet-just-...

The bulk of the Fed intervention is in the bond market, particularly Treasuries. They are also increasing their intervention in the exchange rate market. If the Fed was trying to pump up the stock market, wouldn't they buy stocks? Instead it looks like to me the Fed is essentially financing the US government's fiscal stimulus.

A large portion of the stimulus is going to publicly traded companies, so that would have the effect of propping up stocks that may otherwise trend towards zero.

Re: Why is the stock market rallying when the economy is so bad?

#40

Post by dataminer »

simonh wrote: post #16
toohotatopic wrote: post #5

Could it be that it is not so much the stock market rallying but the dollar plumbing? Money will be printed to keep the economy going. If people assume that this will devalue the dollar then stocks are a safety heaven and demand for them increases which drives up prices whether the dollar is falling or not.

The dollar plumbing relative to what? Not other currencies by the looks of it.

Relative to assets, real estate, stocks, gold etc. Money is getting created in enormous quantities very quickly, while assets cannot be created so quickly. So all currencies are getting devalued relative to assets.
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