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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?

#161

Post by bitcoinmoney »

vadym909 wrote: post #31
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.

Can you send me explain where the figures are coming from?

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

#162

Post by [deleted] »

jjoonathan wrote: post #117
lumost wrote: post #90

Earlier quoted context omitted.

How much of the TINA phenomenon could be due to lack of capital formation throughout the economy? e.g. if 90% of America is too capital poor to form businesses or dream up new economic needs, then wouldn't it follow that printing money into existing asset classes would simply raise their price with no viable places to invest the money?

Yes. I'm sure plenty of Theranos / WeWork style opportunities will emerge to pick up the slack. It's a fundamental problem of capitalism: the market's notion of "value" is weighted by wealth, without growth to stir things up wealth concentrates, and those looking to create value are increasingly forced to search for marginal "rich people problems" rather than tackle obvious "poor people problems." You wind up in a pa…

[deleted]

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

#164

Post by chad_strategic »

vadym909 wrote: post #31
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.

Scream this from the rooftops.

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

#165

Post by kazen44 »

namenotrequired wrote: post #142
thaumasiotes wrote: post #124

Earlier quoted context omitted.

> The problem is so familiar it has its own acronym: TINA, or There Is No Alternative to stocks. > the price of real estate is propped up by similar logic. This is where the idea falls apart. They can't both be propped up by the fact that there's nothing else around. They're two different things.

"No alternative" means "no better alternative". They can both be equally mediocre.

But is that true though? also, isn't "no better alternative" in the eye of the beholder?

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

#166

Post by avvt4avaw »

The stock market is a leading indicator. Economic data (unemployment, manufacturing, GDP etc) are all lagging indicators.

The terrible economic data (high unemployment, low growth) already showed up in stock market returns in the first three weeks of March. What we have seen in April/May represents improving expectations for the economy in the future (as in, a few months to a few years... in theory the market discounts future earnings to infinity, but in practice it is not looking ahead more than 3-5 years most of the time, which is why it is so volatile).

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

#167

Post by paulpauper »

kerkeslager wrote: post #99

Because the stock market doesn't represent the economy as most people experience the economy. First, a lot of companies don't pay out dividends or buy back stock these days, so as time passes, removing their stock price from the price at IPO, their stock price becomes based on perception--not even perception of the reality of the company's value, but perception of the stock's value, which is increasingly just specula…

It is really not a mystery why the market has done so well and will continue to do well. Corporate profits, especially in the tech sector, are at near record highs, much higher than during the 90s. Companies like Walmart are printing cash, and that money goes into buybacks, dividends ,or shareholder equity. Either way, shareholders benefit and this is magnified by very low inflation, so the real return is even higher than it was compared to the 80s and 90s. If huge, multinational companies generate 20-30% profits or cash flow, that is $ that will go to shareholders one way or another. Great time to be in the stock market. Added to positions in April at a discount.

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

#168

Post by tempestn »

bamboozled wrote: post #154
clomond wrote: post #132

Because a company’s stock price is in theory what the market expects is the sum of the total future discounted cash flows that unit of “equity” generates. [1] This means that fundamentally, stocks are forward looking several decades and beyond. The economy right now might be bad but if the expectation is that there is a slow and long recovery lasting 2 years, if a company is expected to be operational, profitable and…

Why did it dip in the first place then? Within the first few weeks of Covid19 the circuit breakers were dripped many times, if the market is so forward looking, what happened then?

People thought the virus would hit harder, and so the long-term impacts would be worse, than they do now.

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

#169

Post by lotsofpulp »

bamboozled wrote: post #154
clomond wrote: post #132

Because a company’s stock price is in theory what the market expects is the sum of the total future discounted cash flows that unit of “equity” generates. [1] This means that fundamentally, stocks are forward looking several decades and beyond. The economy right now might be bad but if the expectation is that there is a slow and long recovery lasting 2 years, if a company is expected to be operational, profitable and…

Why did it dip in the first place then? Within the first few weeks of Covid19 the circuit breakers were dripped many times, if the market is so forward looking, what happened then?

The demand curves and supply curves are constantly shifting.

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

#170

Post by kgwgk »

clomond wrote: post #132

Because a company’s stock price is in theory what the market expects is the sum of the total future discounted cash flows that unit of “equity” generates. [1] This means that fundamentally, stocks are forward looking several decades and beyond. The economy right now might be bad but if the expectation is that there is a slow and long recovery lasting 2 years, if a company is expected to be operational, profitable and…

Is the ten-year outlook better now than it was one year ago?
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