This month has been pretty good news for the economy. Vaccines entering trials, states passing the peak of infection, potential positive news with treatments, large amounts of government intervention indicating that the government and the fed are very focused on putting a floor on the economy, bernie sanders suspending his campaign, lowering how much influence he can have on the democratic platform, and so on and so forth. All things the market likes.
also, even if there is a decrease in earnings, interest rates are also lower, making stocks more attractive.
The market is still down from overall highs. We're not as far down as we were since we don't think it's going to be as bad anymore as we had feared. For 500 large cap stocks listed on US stock exchanges, perhaps about 12% better.
Also, in any recession situation, there's very high volatility. The days with highest stock gains tend to occur right before and during recessions. Even if there's a net downward trend, we'd expect things to be swinging all over the place as people keep overcompensating to the daily news
Stock market is forward looking. It priced in vaccines last spring. Now it is pricing in a complete economic rebound and return to normal this year. Look at commodities, yield curve steepening, flight to airlines, cruise lines, etc and away from WFH tech that got overbought post-Covid.
It’s rallying because there are a lot of undervalued stocks. There have been really good deals the past 2 months. And stocks are a great inflation hedge.
Indeed. S&P 500 is still not even below of what it was in the end of 2018 after the last major instability. Partly thanks to this, 2019 was a marvelous year with stocks gaining almost 40% during a single calendar year.
My reading is we're in a normal correction that has been exacerbated by COVID and last night's massive fall (-30%) in oil price.
Yes, but stocks are ripping higher on much worse jobless claims, housing starts, and Philly Fed numbers than expected, 113 unexplained cases of reinfection in South Korea, and the PPP fund being completely tapped out with three weeks to go in Congress' recess.
The market is fully convinced that everything is fixed.
* It incorporates expectations about the future into stock prices today.
* Economic news looks at what has already happened, often way after it has happened.
* Hence stock prices shift if economic news does not match what investors already expect ie. more positive news than investors expected means stocks go up, more negative news than investors expected means stocks go down.
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 is always very forward looking. It is essentially betting that things are as bad as they'll get. I don't know if I personally necessarily agree, but if you look at countries starting to open up it's not an unreasonable bet.
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?
Saying the market went up 30% last year is a little deceptive. There was a sharp correction in December right before the year started and it was down like 15-20% from the high in September
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.
And yet, markets are nearly at all time highs. I'd like to see a breakdown of who's buying stocks/equities.
EDIT: I know earnings are high, but much of our growth over the last 20 years has been during 2-4% GDP deficit. I don't think that's been priced into the markets. Markets may be assuming that the deficit party will continue.
The rise in the markets has been driven by the fed/treasury stimulus actions, and the fall in new coronavirus cases in the US and Europe. Stocks would still be very low without the government manipulating everything.
I know this is the case because I invested my entire life savings on this one. (I have been glued to CNBC and E*TRADE.) I decided to start buying on March 16th...
also, even if there is a decrease in earnings, interest rates are also lower, making stocks more attractive.
The market is still down from overall highs. We're not as far down as we were since we don't think it's going to be as bad anymore as we had feared. For 500 large cap stocks listed on US stock exchanges, perhaps about 12% better.
Also, in any recession situation, there's very high volatility. The days with highest stock gains tend to occur right before and during recessions. Even if there's a net downward trend, we'd expect things to be swinging all over the place as people keep overcompensating to the daily news
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