My recollection is that only happened during the first month or two of the pandemic. When everyone thought we were surely plunging into a recession or depression. The stock market dropped quite a bit during that same period.
After the initial few months, it all reversed. I don't recall ever seeing any stories like the one you linked past 2020.
Your example is hogswash. Absolutely, the perceived long term value dropped 30% as people feared a million deaths (with lockdown) and dead bodies piling up outside hospitals across the country (with lockdown, and not just New York City). The stock market is rising now that people realize the pandemic, while still bad, isn't going to be as bad as those predictions. Our perception/understanding of the pandemic has rapidly changed.
Is the stock market really needing to recover? I don't pay much attention to it but whenever I look stocks and indexes they seem to have gone down a little but not to pre-pandemic levels. What am I missing?
In March 2020 they were down 30% from the peak a month before. There was a virus. You may have heard about it? It was in the news. :) People didn't know what was going to happen.
Previous peak to present might be a less misleading factoid. And that is +20%. Still a big number but less impressive. It may be that confidence in public markets was bolstered by the resilience of the big companies' profits in the face of the virus.
The stock market is basically at late 2019 levels when everything was totally fine. The disconnect between the market and the economy is quite dystopian.
The market incorporates news quickly, such as that there is a pandemic and it is going to have bad effects. Then it essentially forgets about it. I suspect most of the 12% is a response to government actions to control the pandemic and to the recent news that it is coming under control. You will see another drop if relaxing controls leads to another covid spike, and when economic effects appear on corporate financial reports, and when long term job losses are reported. Those are perfectly foreseeable, but in the meantime the market will likely go up as the memory of why they went down in the first place fades.
I don't know, but I feel like the past 13 years just let the dry powder accumulate. COVID and resulting stimulus and supply shocks were the spark. When speculators saw the market dynamics they were able to use the cheap money to speculate, kicking off a feeding frenzy. Markets are non-linear. I think we crossed an important threshold in March 2020 and the fed wasn't active enough to realize or react to it.
That said, you did see asset prices reach questionable levels even before COVID. I pulled most of my money out of the market in late 2019 for that exact reason. I was convinced we were due for a correction then.
That could be. Although I'd argue the opinions of "most people" are not always relevant to market moves, because most people are not controlling most of the money.
Regardless, the factors you mention are only two of the many factors that affects the value of stocks. The reason that causes a crash isn't necessarily the inverse of the reason it may go back up.
Poor management of the pandemic isn't necessarily a reason for stocks to drop, either. The market doesn't care about public health any more than it affects profits.
It was not easy to see that the market would move incredibly higher over the course of the pandemic. Not in January 2020, nor any time since then. People can't even explain it after it has happened.
To put it into perspective, the last time the market behaved like (multiple drops of this magnitude) this was 90 years ago, in 1929, and it was at the start of the Great Depression. Today was the second largest percentage drop for US Markets in history.
Now is not a good time to sell your stock holdings (at least not anymore). This smells of a panic right now.
I think a severe recession is all but guaranteed at this point. Let's hope we get through this with no more than that.
The narative here seem disengenious, framing everything as one extreme to another:
Then came the coronavirus-related market shock of 2020...everyone assumed the absolute worst...then everything ... went nuts... around the beginning of this year, when it all ground down to a halt.
I don't doubt you can find (many) examples to support this, and yes, the themes are along these lines, but this is not the absolute reality in many industries, geographies and companies. If companies that have been hit hard are still able to raise, though maybe it's more painful.
My take-aways are:
* This is not the end of the world
* Poor fundamentals will be recognized and punished (finally) but only for a while
Take a look at December 2018. There was no pandemic. The Fed tried to very slowly reduce its balance sheet. The stock market threw a major tantrum (by dropping 20% or so) and voila, the Fed reversed its course.
The same in 2016, and other times
How can you say they are not focused on the stock market? They are primarily focused on propping up the markets.
We live in weird times. I too am shocked and constantly shown wrong by the SP50 rising while many millions file unemployment.
I’ve read that part of the rise is from the Fed lower rates to 0. It essentially pushed banks to buy into the market for their only sources of interest.
I know from the past that company stock usually rises after they announce reorganization. Investors may be seeing opportunities for profit down the road from more optimized org charts following the mass unemployment.
I do believe Dr Fauci and other medical researchers comparing this to 1918. If past is precedent we will see a far worse outbreak and economic fallout in the fall and winter then we did this spring. If the valuation decrease were over pessimistic this time around then next time may be more muted. If the decrease prove to have been over optimistic then expect further devaluations next time. Both of those assuming rational actors and reactions, neither of which assured.
I also think we haven’t seen the full fallout from even the spring yet. I think we won’t know until the end of august how all of the unemployment affected rent and mortgage payments during the spring outbreak. We also don’t know whether the protests are going to spark super spreader events. That could necessitate closing the economy yet again and sooner. On the other side, we don’t have a monthly stimulus or cancelled obligations-those could have up or down impacts respectfully.
I see a lot of really grave uncertainty in the future right now. The pandemic is a very real thing. The protests are too. The political desires to stimulate the economy despite any other affects is perhaps greater still. So I think there’s lots of noise and uncertainty here-which makes for volatility in valuations.
Edit-I also just want to point out that the 1920s were marked by more than just Black Friday in October(date?). I’d suggest we all go back and refresh on how things played out back then to compare to today.
I love how some market-watchers suddenly retreat into abstract economic pronouncements in the face of meltdowns. There was a fair bit of this in 2008 and 1989, too.
Nobody is lost or vanishing due to Covid-19, it's just a change in their respiratory rate.
I can attest. Beginning of covid: stocks are crashing, going down 10% every day, I read the paper from that uni in London that says we are going to be alternating light and heavy lockdowns for the next 12-18months. More than a year of lockdown? How can the economy survive this? I’m like: sell, sell, sell. Right when I sold the market went up like crazy and has more than recovered now.
After the initial few months, it all reversed. I don't recall ever seeing any stories like the one you linked past 2020.
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