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Even in lockdown the economy is not fully stopped, though, and we can expect a rebound after the lockdown is lifted, but the lockdown will impact more than a single month.
All in all, I think that it is probably a reasonable ballpark figure for 2020 as whole.
Earlier quoted context omitted.
?? What is the purpose in comparing metrics about our economy recessing based on production of goods vs a market for pieces of company ownership. They are not and never have been the same and there is no law they must follow the same trend
Sure, if you ignore that the companies are the ones producing and selling those goods. And that their well-being depends on how many they sell.
Earlier quoted context omitted.
There's a mistaken belief on WSB and elsewhere that bad news should make stocks go down. Stocks go up when the market thinks they'll be more valuable in the future, that's all there is to it. The cash will flow into the assets that provide the greatest returns, and right now that's stocks. Since treasuries provide almost no return, and corporate bonds are at high risk of default, the money will move into stocks becau…
If corporate bonds (debt) are at high risk of default, why would there be investment in those same companies' equity which is even higher risk? The fact that treasuries are providing no return tells you that most money is invested there "safely". The problem of course is that the USG should be making sure small companies don't fail, because that's the actual driver of the economy both for employment and consumption.
The US government has also signaled that they will bail out these debts, so the companies themselves (and thus, their stock) will probably be fine even if they stop paying their debts.
Crazy times we live in.
I wish I could say I disagree, but to be perfectly honest, I was fully expecting a recession last year. As someone may have already mentioned though, between FED basically keeping the market afloat, stimulus working its way through the economy and dollar still riding as a safe haven, it is not that surprising that US economy did not crash, while a good chunk of population is at home and out of commission. The thing t…
> The thing that worries me is that attempting to prolong it as long as we are, we are basically setting up a stage for a greater depression Why?
Nah, it signals exactly nothing. If there was no Coronavirus, then maybe. With Coronavirus it is just as likely that the economy is going to rebound once the worst of the virus passes. People stopped buying stuff but rest assured, they will make up for it when they finally can.
I understand that the economy and the market are different but I'm so confused. The S&P is up ~12% this month, despite massive unemployment, a shrinking economy, and serious long-term questions about the outlook. Is most of the 12% just market speculation that the virus issue will pass without a long-term earnings hit?
It is a bet on the continued support of the market by the Fed. If you're interested in preserving purchasing power 15 years from now, would you rather hold dollars or things today? As a value investor, all of my theses were blown out of the water by the unprecedented Fed intervention. It is an environment in which the fundamentals are uncertain. I'm standing pat and waiting for things to make sense before moving agai…
Pretty much this. The Fed is backstopping losses. Betting against them post-2008 is a tough position to be in.
I understand that the economy and the market are different but I'm so confused. The S&P is up ~12% this month, despite massive unemployment, a shrinking economy, and serious long-term questions about the outlook. Is most of the 12% just market speculation that the virus issue will pass without a long-term earnings hit?
3 things: 1. People keep saying about the market being up recently, but skip the part about it still being down about 10% since the start of the year. 2. S&P is heavily weighted towards the strongest companies. Amazon, Apple, Facebook, Microsoft and Google account for 20% of S&P market cap. Most of those companies have been helped by the pandemic, or at least not hurt nearly as bad as smaller companies. 3. The market…
Nah, it signals exactly nothing. If there was no Coronavirus, then maybe. With Coronavirus it is just as likely that the economy is going to rebound once the worst of the virus passes. People stopped buying stuff but rest assured, they will make up for it when they finally can.
When things recover, a lot of people will be sinking money into late rent payments and credit card bills, not spending.
A lot of people cleared off their credit cards of anything not critical. Will I go back to the gym? Maybe. Will I turn back on Amazon Prime or half the other subscriptions I cancelled? Nope. Will I eat out as much now that I've had a month and a half of eating healthy at home. Probably not.
I understand that the economy and the market are different but I'm so confused. The S&P is up ~12% this month, despite massive unemployment, a shrinking economy, and serious long-term questions about the outlook. Is most of the 12% just market speculation that the virus issue will pass without a long-term earnings hit?
It's not that they're merely different, the modern stock market bears almost no relationship to "the economy". It's HFT algorithms all the way down.