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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?

#61

Post by MattGaiser »

throwaway_jobs wrote: post #48

People don’t realize in 2008 on the verge of financial collapse the government passed two bailouts totaling $1.8T leading to the longest bull market in history. We have already passed bailouts totaling close to $7T...no matter what happens the market will rocket, basically WW3 has been priced in so as long as that doesn’t happen it’s to the moon.

The USA also had the longest period of economic growth in history after 2008.

https://www.cnbc.com/2019/07/02/this-is-now-the-longest-us-e...

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

#62

Post by kitotik »

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 many Americans can’t even pay their current bills or save literally a single dollar. So fractional shares are irrelevant unless they are free.

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

#63

Post by jhallenworld »

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…

Faith in humanity: buy stocks. No faith in humanity: buy gold.

Large cap stocks are to some degree an international investment.

REITs: well they are down, maybe more of an opportunity if only because the good stocks are so high.

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

#64

Post by MattGaiser »

formercoder wrote: post #24
jhallenworld wrote: post #20

Earlier quoted context omitted.

There is much bigger risk of deflation during a depression. Do you really think there will be wage inflation when there is 20% unemployment?

Exactly this is why I don’t understand the folks who think inflation is a purely monetary phenomenon. With demand shocks like this how can we not have deflation?

They are people who have never bothered to look at an inflation table. They are content to blindly repeat that one economics textbook they read.

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

#65

Post by ethbro »

eloff wrote: post #45
davidw wrote: post #19

Earlier quoted context omitted.

> a second wave of epidemic Judging by people's behavior, and the politicization of even common sense measures like mask wearing in the US, I think this is likely. I hope I'm wrong.

It's not just likely, I worry you won't even get out of the first wave. With everyone pulling in literally 50 different directions and and no leadership from the top this might just bounce between states like the proverbial hot potato. I feel bad for you guys watching from the north here.

Just wait until we get closer to the election. Then it's going to get absolutely bonkers.

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

#66

Post by davidw »

ethbro wrote: post #65
eloff wrote: post #45

Earlier quoted context omitted.

It's not just likely, I worry you won't even get out of the first wave. With everyone pulling in literally 50 different directions and and no leadership from the top this might just bounce between states like the proverbial hot potato. I feel bad for you guys watching from the north here.

Just wait until we get closer to the election. Then it's going to get absolutely bonkers.

I was already worried about what might happen with this election, but the pandemic is likely to make things worse.

My wife and I have been discussing logistics to get somewhere safer in the event of different scenarios, but at the end... it's just difficult to predict what might happen and where.

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

#67

Post by generalpass »

dataminer wrote: post #40
simonh wrote: post #16

Earlier quoted context omitted.

The dollar plumbing relative to what? Not other currencies by the looks of it.

Relative to assets, real estate, stocks, gold etc. Money is getting created in enormous quantities very quickly, while assets cannot be created so quickly. So all currencies are getting devalued relative to assets.

Would you consider treasuries an asset? They're creating those pretty quickly...

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

#68

Post by FlyMoreRockets »

jhallenworld wrote: post #20
cft wrote: post #12

This 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

There is much bigger risk of deflation during a depression. Do you really think there will be wage inflation when there is 20% unemployment?

Too many people competing for too few jobs should keep wages down.

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

#69

Post by xtiansimon »

jhallenworld wrote: post #63
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…

Faith in humanity: buy stocks. No faith in humanity: buy gold. Large cap stocks are to some degree an international investment. REITs: well they are down, maybe more of an opportunity if only because the good stocks are so high.

> Faith in humanity: buy stocks. No faith in humanity: buy gold.

Speaking to a friend who bought stocks recently, they said, "I'm bullish on America."

I might say if you are the opposite of bullish, then buy gold. And if you have no faith in humanity, buy a survivalist bunker.

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

#70

Post by nostrademons »

toohotatopic wrote: post #14
nkurz wrote: post #2

https://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…

Even if there is a second wave, there will be a time after Corona eventually. There won't be any new players by then so the market shares will almost be unchanged. Stock prices are discounted future profits for about 15 to 20 years. Those profits are still there when Corona is over. From that perspective, why should share prices fall by more than 5-10% for every year that Corona is locking down the economy? *edit: If…

From that perspective, the stock market should have no volatility in share prices whatsoever - it should fairly value each company based on their profits over the next 15 to 20 years, and since those profits don't change, neither should the share price.

Stocks are based on expectations of future profits, i.e. psychology. "In the long run, the stock market is a weighing machine. In the short run, it's a voting machine."

Few investors' psychology will let them look at a year of bad news and still think "Oh, it's going to get better in the future." After about 3 months you start doubting yourself and wondering if maybe you were wrong in the first place, and you've entered a brave new world where people randomly die and commerce or long-term plans are impossible. All of the economic data - corporate earnings, employment, share prices, etc. - will reflect the new normal, so there's no reason (other than your memory of what the '10s were like) to believe that share prices would always go up.

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