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?
#2https://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 soon after society starts opening up again. If (when) this strong recovery doesn't happen, the bottom falls out. If the reopening is combined with a second wave of epidemic and a renewed lockdown, something akin to financial panic ensues.
Re: Why is the stock market rallying when the economy is so bad?
#3Because 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-...
Re: Why is the stock market rallying when the economy is so bad?
#4After five decades of deliberately severing worker compensation from worker productivity, the stock market is now just a barometer for rich people feelings. When they're feeling good it goes up, when they're feeling bad it goes down.
Re: Why is the stock market rallying when the economy is so bad?
#5Could 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.
Re: Why is the stock market rallying when the economy is so bad?
#6https://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…
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Re: Why is the stock market rallying when the economy is so bad?
#7Because 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.
Re: Why is the stock market rallying when the economy is so bad?
#8Because 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 then, it has not only recovered but it is now climbing to all time highs.
Re: Why is the stock market rallying when the economy is so bad?
#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 don't invest now, it'll cost you much more in the future to own assets with positive rates of return.
Bonds: Near 0% interest rate, practically no better than holding cash.
Real Estate: Not nearly as liquid as stocks, but the price of real estate is propped up by similar logic.
International Investments: Now this could be interesting if capital flight from the US begins occurring. However, every other economy is hurting like the US's or has significant problems with transparency and whether investors can get their money back out again.
Stocks are more than just their market price. They represent ownership in a piece of the American economy and its future dividends. As of 2016, the richest 10% of America owns 86% of its stocks / future economic output. With the economy plunging while stock prices remain high, this means the fence between being a renter and a owner just got even higher.
Re: Why is the stock market rallying when the economy is so bad?
#10Little else to do while sitting at home with some spare cash other than gambling at the stock market.