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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?

#261

Post by dharma1 »

huhnmonster wrote: post #211
toohotatopic wrote: post #17

Earlier quoted context omitted.

All other countries have the same need for printing money, so the value compared to other currencies should remain stable.

That is obviously true, but that poses another question: Since there is no "real" value for the dollar to compare to (same for all other currencies), what if all countries had printed money at the same rate and around the same timeframe? Comparatively, it would look like nothing changed, but in my opinion, the market would want to price that in as some sort of "inflation" (no idea if this really is inflation at that…

You could compare it to the value of gold over time

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

#262

Post by kelnos »

dataminer wrote: post #26
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…

What about high yield bonds, are they worse than investing in stocks right now?

Depends on the issuer. As I mention upthread, I think US major airline bonds are probably ok, more or less regardless of rating, since the gov't will always bail them out in the end. The largest hotel/hospitality chains may befine as well (though I haven't looked into their financial situation). But businesses will still continue to disappear over the next year from this, so I would tread with care.

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

#263

Post by chiefalchemist »

hannasanarion wrote: post #254
chiefalchemist wrote: post #107

Earlier quoted context omitted.

Because the Fed isn't there all the time. Under normal circumstances, you can't just sit there. Aside from competition, you won't retain quality employees.

But they are now, and that's what matters. When prices fell the first time, it didn't even take a week before the government passed the largest stimulus ever, 80% of which went to corporations. Investors know that the government will do anything to underwrite their risk.

Nah. That doesn't guarantee a return. It might mitigate the downside but there's still risk. No one takes on risk to break even.

You invest for a return. Stopping a slide yesterday has little to do with getting a return tomorrow.

The future. New products. New ideas. Etc. That's where a return comes from. Not the Fed.

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

#264

Post by atlgator »

Inflation has been hidden since the Obama years of quantitative easing due to globalization. You can pump cash into the market and, if you keep the cost of consumer goods low by outsourcing to 3rd world labor, the CPI doesn't increase. Meanwhile, the cost of items that are produced here, e.g. homes and cars, skyrockets. Trump has continued the trend of pumping the market and accelerated it in the last few months at an alarming rate. Problem is, globalization is decreasing as countries isolate. No place to hide the inflation. The stock market will continue to increase despite the bad news.

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

#265

Post by mlthoughts2018 »

sigstoat wrote: post #225
Auracle wrote: post #115

Earlier quoted context omitted.

It probably doesn’t apply to those struggling with hunger, but just because people don’t have savings doesn’t mean they don’t have expendable income. It could just as easily mean they prioritized stuff over savings, and I bet that’s the case for most of them.

https://www.cnbc.com/2019/12/12/americans-spend-over-1000-do...

That’s an average per consumer. It’s likely skewed way up by extreme outliers. Need to see median, 75th percentile, 95th percentile to really understand it. The headline seems like deliberately misleading journalism.

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

#266

Post by kube-system »

Hydraulix989 wrote: post #50
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…

Why are stocks inaccessible to so many Americans? There are fractional shares, and you do not have to be an accredited investor.

Who said they were inaccessible?

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

#267

Post by mrep »

fzeroracer wrote: post #150
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…

Doesn't this argument mean that the stock market should in theory be recession proof? If stocks are looking forward several decades, then it should be factoring in the recovery from any recession we face. Which as we've seen during various recessions doesn't seem to hold true.

A company isn't guaranteed to make it out though and if they don't, your stock is now worth zero.

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

#268

Post by rvcdbn »

chrispeel wrote: post #125
vadym909 wrote: post #31

Earlier quoted context omitted.

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.

> 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. Are you so sure that they don't get this? I guess that many do understand it and either would like a much more inequality-reducing tax structure, or envision themselves as (somehow!) becoming part of the top 10%.

"39% of Americans will spend a year in the top 5 % of the income distribution, 56 % will find themselves in the top 10%, and 73% percent will spend a year in the top 20 %."

from https://medium.com/incerto/inequality-and-skin-in-the-game-d...:

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

#269

Post by kelnos »

nullc wrote: post #131
Hydraulix989 wrote: post #50

Earlier quoted context omitted.

Why are stocks inaccessible to so many Americans? There are fractional shares, and you do not have to be an accredited investor.

If your net worth is negative servicing your debts has a better risk adjusted return than investing in stocks unless the interest rates on your debt are extremely low.

Yup. If you have a bunch of credit card debt at 20+%, and/or are paying off a car in the high-single-digit percent range, then you really want to pay that off before you consider investments.

If all you have is a sub-5% mortgage (though even that's pushing it), or a low-interest student loan, then you should put money toward retirement if you can.

On the other hand, ~15 years ago I had a 3.5% student loan, and even though rationally I should have carried that debt (making regular payments, of course), for peace of mind I paid it off as quickly as a could. I think a lot of people are in that boat, or worse, having been taught that all debt is bad for you.

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

#270

Post by closeparen »

Hydraulix989 wrote: post #50
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…

Why are stocks inaccessible to so many Americans? There are fractional shares, and you do not have to be an accredited investor.

Because the priority order is:

a) Consumption spending

b) Real estate

c) Stocks

When middle class people hit diminishing returns on electronics and vacations, they upgrade their houses. Appetite for remodeled kitchens and bigger, nicer, better-located houses is voracious, so relatively few people satisfy it and fall through to stocks.

Making sacrifices on housing in favor of your stock portfolio is of course possible, but will get you a lot of weird looks and pressure from family, particularly if kids are involved.

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