> Can someone help me understand why the broader stock market is actually up compared to six months ago despite all these dire numbers being thrown around? Heck, Boeing stock is up today!
Dumb money is pouring in, and institutional investors are riding the dead cat bounce.
For Boeing specifically, it's because they fired thousands of workers to cut their costs. And to their credit, they're actually expecting a long slump. Many businesses are still deluding themselves.
I hear Warren Buffet’s voice over my shoulder telling me “Boeing stock is on sale.” Boeing is a huge defense contractor that is never going away. Maybe this is the bottom of their current crisis and it is a good time to buy?
> 1. People keep saying about the market being up recently
So, down 10% from the previous bubble.
> 2. S&P is heavily weighted towards the strongest companies
Good point. Dow is also up almost as much though.
> 3. The market is always very forward looking.
I may be cynical, but I see perhaps 2 to 3 years to regain the jobs we are losing, to see the employment rate return to earlier levels. That's years of depressed spending, and all the other woes of society from high unemployment.
So the market is looking to, what, 2025 or something?
> Very clear the market has now negatively reacted to high operating expenses that largely stem from excessive headcount.
Are you saying that because stock prices are dropping that the market has reacted to excessive headcount?
Cause I think a better explanation for that, is that in the past 2 years we've had inflation, and that was reflected in the profits of the companies for 2020-21, and now that the fed is lowering interest rates, we're expecting that inflation to stop, and so that's affecting the stock market.
This seems to have very little to do with these companies business models, and everything to do with them failing to recognize that their profit changes are readily explained by inflation/deflation. Which seems to be a better explanation of what the markets are reacting to.
>> And their stock is up 30% in the same timeframe. That's not inflation hitting supply chains, that's just corporate greed
You're assuming the stock price reflects increased profit. I don't doubt that, but it is not a given. IMHO the stock market has been going up for 20 years due to the 401K plan thing - the highest income people are indiscriminately dumping part of their pay into mutual funds every month. This is part of the reason white-collar jobs were more protected during covid, while hourly folks got told to stay home. If they made people with 401K stop working the market would have collapsed.
> This is anecdotal and it might come across as bitter and tonedeaf as someone who is not in a STEM job and cant see the bigger picture very well. Im a diesel engine tech who repairs those big trucks carrying food and shit tickets to grocery stores. the fact that ANY market is completely detached from whats actually happening to Americans is frustrating.
Thanks for posting this comment. I know it sounds trite, but I’m sending well wishes your way, hoping you and your loved ones make it through this crisis as minimally impacted as possible.
I think you likely see the big picture better than others. The economy is absolutely crushed. That the markets go up must be especially frustrating to those not able to partake in any gains. My take on the market is that it will go up on good or bad news for the moment. Going up on good news is self explanatory, going up on bad news could be related to speculation that the Fed and Congress will pump even more money into the economy —- the wealthy expect to be propped up by the government as they were in the great financial crisis.
My cynical take on this is that the rich expect to get richer, no matter the outcome, and are investing accordingly. My question is how much, if any, social unrest this will lead to.
> It appears the market doesn't give a shit about company fundamentals right now.
Fundamentals have never mattered all that much. Stock prices are based on demand for the stock itself, which is largely dependent on economic conditions. When the Fed was increasing the money supply a lot of that excess pumped up stocks because there was nowhere else for it to go, now that money is drying up causing the market correction.
> Yet the stock market is at all time highs in a global pandemic. Could you imagine anything more backwards and bizzare?
I'm not sure if you're implying this but the stock market never was an indicator of the economic health of the country. Its an indicator of the economic health of the wealthy (tautologically, since its where most wealthy individuals park their wealth) , and for that its been pretty accurate.
> But it sounds like the bulk of your confusion comes from a significant misunderstanding of what the stock market _is_.
I think OP would not be the confused one in 6 months time.
Stock market only cares about the future when people care about the future. AKA when there is optimism in the air.
The 2015-2022 wave of optimism was quite frankly uncalled for and overextended given the reality at the base level. Especially what happened 2020-2022.
>And what about all the companies that still have billion dollar market caps but have NEGATIVE earnings? (Atlassian, Snowflake, Uber, Crowdstrike, Shopify.... the list goes on)
I think they are an extremely small part of the $100tn global stock market that people here love talking about because they work there.
>Folks we are in a tightening cycle in order to fight inflation.
My point was that we are at multiples in-line with 1990, ya know when we had 8% 10Y yields.
Folks, call the end of the world at your own peril.
> The odd thing to me about it is that futures seem largely positive. Is it because the CAREs act or dropped labor is supposed to equal money not spent and thus meant to shield companies ( and investors )? I honestly do not get how market interprets it as good news.
Personally, I think things are happening too fast to gauge what investor activity is actually reacting too. There can be big movers who are still in decision-making stages and their actions have yet to be made, or they acted hastily and sold, then come back and repurchase, etc.
> The stock markets have treated me quite well the last couple years but recently I have been feeling nervous.
I’ve been investing in the market since I graduated college many, many, many years ago. Over time, the market has gone up reaching new highs.
Every few years I felt like it was overvalued. More recently, I remember looking at my portfolio in 2015 and thinking it was overvalued and bound to crash. In Nov 2017, I felt the same way. In 2019, I was in a meeting with a manager at my company and somehow the stock market came up. We agreed it had grown too much and was due for a significant correction.
In March/April 2020 I had friends who panic sold during COVID.
I follow a few personal finance websites, and there’s a story every few weeks or months about someone predicting a collapse.
My strategy hasn’t changed at all. I’ve been purchasing VTSAX every month for many, many years now.
The stock market's price level is well above where it was pre-pandemic, it's trading at earnings multiples in-line with 30+ year averages [1] (what was the 10Y yield in 1990, might I ask?) because earnings have gone up.
I know being doom and gloom makes you sound smart (to some), but don't fall into the trap of 'everything is shit now because inflation has been high for 20 months'
> stock market has been very profitable since march. I made 100% last year just on random long term investment.
Hmm. All this makes me wonder if the country opening back up is going to cause the market to flatten out for a bit as people have less money and incentive to invest. Food for thought.
> I think the market (and analysts like this) are all throwing the towel
1) Intel is up 100% from ten years ago when it was at $ 23. All that despite revenue being flat/negative, inflation and costs rising and margins collapsing.
2) Intel is up 60% in the last 12 months alone.
Doesn't look to me like they throwing the towel at all.
> I am surprised at the number of people who think that stock prices going down is due to financial health of companies
The financial health of many companies is significantly affected by virus mitigation strategies. Companies that were healthy in January may be on the brink of insolvency in June. The market is pricing that in to some extent.
> It appears the market doesn't give a shit about company fundamentals right now.
I don't think it ever did. I think it's all about the free money pouring into the economy due to low interest rates set by the federal reserve. They turned off that tap, the flow stopped and the economy screeched into a halt.
Dumb money is pouring in, and institutional investors are riding the dead cat bounce.
For Boeing specifically, it's because they fired thousands of workers to cut their costs. And to their credit, they're actually expecting a long slump. Many businesses are still deluding themselves.
reply