Could it be that despite everyone freaking out, the wisdom of the crowd (the market) is pretty sure everything is going to be OK? It's possible that the market is the only thing acting rational right now.
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?
#521. The economy is not that bad for many companies in the stock market. Why would Proctor and Gamble be that negatively impacted during this? It lost 20% of its value though. Same with a stock I hold. It was slaughtered for being an airline stock, but it mostly does flights to remote communities, which are a government-funded necessity so they can eat and have medical care. P&G should not have meaningfully fallen and this other stock should have lost maybe 20%. It lost 70%. Now it is only down 40%. So the market didn't know what to do and overreacted in many places. Same with all sorts of natural gas stocks which got slaughtered along with oil. Much of the initial drop was unjustified.
2. The stock market will walk away with a larger share of the economy than it had before. Vast amounts of shopping moved to Amazon and online venues. The large publicly traded restaurants will survive or just buy out flailing franchisees at a discount. So less pie, but a greater share for public investors.
Re: Why is the stock market rallying when the economy is so bad?
#53People buy into a rally because they don't want to miss out, they expect it to keep on rallying. It's herding behaviour, and leads to so-called dead-cat bounces. At least in the short term, there's no reason to expect any intelligent price discovery from the markets. Come back in six to twelve months and then we will see.
Re: Why is the stock market rallying when the economy is so bad?
#54> 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.
again it comes down to options. name something that:
1. the government eats the loses.
2. liquid
3. better returns.
Re: Why is the stock market rallying when the economy is so bad?
#55> 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…
Australian, South Korean and New Zealand's currencies jumped in value because they handled the pandemic very well and are now very attractive investments.
I think that's because during a crisis people flock to USD for safety, now that it seems to be under control, people are selling those USD again.
Re: Why is the stock market rallying when the economy is so bad?
#56This 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
We are still waiting for the surge of inflation you inflation hawks complained about in 2008 when this was all last done...
https://www.usinflationcalculator.com/inflation/current-infl...
Re: Why is the stock market rallying when the economy is so bad?
#57> 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…
Why are stocks inaccessible to so many Americans? There are fractional shares, and you do not have to be an accredited investor.
While a modest fraction of people trade individual stocks, a lot of Americans have some type of 401k, pension, or retirement account that is tied to the stock market.
This pegs it at 50% of private sector workers and 80% of public sector workers. https://www.pensionrights.org/publications/statistic/how-man...
Additionally, in many cases, couples may just have one person with access or contributions to the market - but this still leaves them exposed (for good and bad) to the market.
Re: Why is the stock market rallying when the economy is so bad?
#58Re: Why is the stock market rallying when the economy is so bad?
#59Because for most companies, the fundamentals after the pandemic won’t be changed. Great companies are being sold at massive discounts, and as the buying escalates shorts are getting squeezed out and forced to cover. Anecdotal, but during the pandemic my portfolio had shed up to $60k at its lowest point around March or April, and I didn’t sell anything, in fact I started accumulating shortly after the bottom. Since th…
P&G shed 20%. Its fundamentals have not changed at all.
Re: Why is the stock market rallying when the economy is so bad?
#60https://archive.is/cmMx5 It's a decent article. Here are their 5 reasons: 1. Bets on a “V-Shaped” Recovery 2. Market Leaders Keep Rising 3. Corporate-Earnings Expectations Remain High 4. Old Habits Die Hard 5. The Fed’s Backing Personally, I'm betting we're still headed to a bloodbath, but slowly. This quarter's earnings are expected to be terrible, so this is already priced in. But the market is expecting a recovery…
My $0.02, we're going to see bifurcation that the market hasn't fully priced in. Not a good time to be in broad ETFs.
Highly likely: Coronavirus is going to be circulating until the end of 2021 (based on transmissibility & vaccine timeline). We'll have better therapeutics to blunt the symptoms.
But steps required to (intermittently) re-suppress transmission (NYC is ~20% exposed? So at minimum 1-2 more spike repeats) are going to continue to harm the economy over that period.
There is no version of social distancing or lockdown that permits normal brick and mortar economic activity (and therefore normal employment levels).
And there is nothing shy of those that dent infection spread once it gets going in an urban center.
50/50: Government stimulus cannot replace normal market demand over that period (i.e. "V-shaped recovery").
Firms and industries that can adapt (curbside pickup, work from home, pivot to online delivery) and are deemed essential do fine by cannibalizing their peers.
Eventually, the demand destruction will hit the markets. You can't sell product to people who are unemployed and have no disposable income.
Consequently, adaptive companies are going to survive & maybe thrive. Everyone else looks pretty economically grim under likely scenarios.