Why is the market climbing so fast?

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Why is the market climbing so fast?

Postby TRC » Thu Mar 14, 2013 1:14 pm

And not that I'm complaining by any means :) , but what do you think is causing the market to reach new record highs?

Do you think it's part due to all the investors who have been sidelines for so long and are now getting back into the market with renewed confidence?

I'm also seeing lots of posts by people questioning "why bond funds" and folks stating they have very aggressive equity asset allocations with minimal bonds for their age. Seems like people are very bullish on this market rise continuing.

I'm hoping this ride continues for a long time, but just curious to hear theories on why the market is climbing at the rate it's at.
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Re: Why is the market climbing so fast?

Postby livesoft » Thu Mar 14, 2013 1:18 pm

We are back to the Goldilocks Economy. Some things that were repressing stock prices (Fiscal Cliff, Sequester) have not turned out to be the Big Bad Wolf. Life is Good, so the stock market reflects that.
It's all about short-term opportunistic rebalancing due to a short-term change in one's asset allocation, uh, I mean opportunistic rebalancing, uh I mean rebalancing, uh I mean market timing.
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Re: Why is the market climbing so fast?

Postby crowd79 » Thu Mar 14, 2013 1:18 pm

I don't know how to explain without getting too political, so I'll steer clear of it. All I know is we need a correction badly. Too many problems going on worldwide for it to stay this lofty much longer...
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Re: Why is the market climbing so fast?

Postby The Wizard » Thu Mar 14, 2013 1:24 pm

Two or three main reasons:
1) it was beaten down several times for FUD reasons that had minimal bearing on the fundamentals of the companies in the Wilshire 5000.
2) folks are slowly realizing they need to be back in stocks to some degree following the '09 crash.
3) other (un-trained) folks are simply band-wagoning, throwing unwarranted money into stocks as new highs are reached; this may cause an eventual BUBBLE if excessive P/E values are reached...
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Re: Why is the market climbing so fast?

Postby Toons » Thu Mar 14, 2013 1:33 pm

For the opposite reasons it declined from 2007-2009 :happy
The "market" has an uncanny way of forcing out the majority of participants,
then once it does it resumes its Nortward trek.If it was easy remaining "in" the market for decades ,everyone would be "rich" :happy
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Re: Why is the market climbing so fast?

Postby am » Thu Mar 14, 2013 1:37 pm

Alternatives to stocks are so poor that there is no choice. I think this is artificial. I worry that market will crumble once we enter a more normal environment and rates start rising. I think there is also an element of bubble forming behavior from investors (buy high sell low). As an aside, I banked some of my stock profits and payed off my mortgage. Would feel worse if market fell and I lost this opportunity.
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Re: Why is the market climbing so fast?

Postby Scooter57 » Thu Mar 14, 2013 1:37 pm

Low trading volume. If you look at the chart for ^GSPC--the S&P 500--you'll see that the only heavy trading is happening when there are down days. It's just like when realtors tell you housing prices are rising in your town, but then you learn only 2 houses closed all year instead of the usual 39 and one was a mansion.
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Re: Why is the market climbing so fast?

Postby STC » Thu Mar 14, 2013 1:38 pm

I love when the local "dentist" decides to try to explain short term moves in the stock market, or global economics. Its like a Puppy explaining the Higgs Boson.
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Re: Why is the market climbing so fast?

Postby MnD » Thu Mar 14, 2013 1:52 pm

Jump in your time machine back to January 2000 and ask investors if Dow 14,500 in 2013 would be an out of control bull market rising too fast sort of thing.
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Re: Why is the market climbing so fast?

Postby BBL » Thu Mar 14, 2013 1:57 pm

MnD wrote:Jump in your time machine back to January 2000 and ask investors if Dow 14,500 in 2013 would be an out of control bull market rising too fast sort of thing.


Do we get to tell them that it isn't so bad with the March, 2009 lows as context? I wouldn't want them to think the seeming road to nowhere lacked excitement. :D
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Re: Why is the market climbing so fast?

Postby Keep It Simple » Thu Mar 14, 2013 2:01 pm

TRC wrote:And not that I'm complaining by any means :) , but what do you think is causing the market to reach new record highs?


I have no idea!

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Re: Why is the market climbing so fast?

Postby am » Thu Mar 14, 2013 2:04 pm

MnD wrote:Jump in your time machine back to January 2000 and ask investors if Dow 14,500 in 2013 would be an out of control bull market rising too fast sort of thing.



If you did not look from 2000-now than it would be a yawn reaction. But what a ride!

I think the next decade will also be a ride. Too much disconnect between economy and reality for everyday people and stock market.
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Re: Why is the market climbing so fast?

Postby moneyman11 » Thu Mar 14, 2013 2:05 pm

TRC wrote:Why is the market climbing so fast?




Up just 12% over the last 6 years is "climbing so fast"?


That's right ... it's all about how you "spin" it. :)
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Re: Why is the market climbing so fast?

Postby scone » Thu Mar 14, 2013 2:06 pm

ZIRP continues, housing market starting to show signs of life, unemployment numbers looking a little better, etc. And still not much inflation, at least official inflation. In that kind of environment, it would be weird of the stock market did not rise.
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Re: Why is the market climbing so fast?

Postby HomerJ » Thu Mar 14, 2013 2:07 pm

MnD wrote:Jump in your time machine back to January 2000 and ask investors if Dow 14,500 in 2013 would be an out of control bull market rising too fast sort of thing.


Exactly...

Stock market goes up too far top fast (1946-1966, 1982-2000), then people realize that Price compare to Earnings is out of whack (high P/E ratios).... Two ways to fix this... Drop price and/or increase earnings.

From 1966-1982, the stock market PRICE was mostly flat (lots of ups and downs in there, but DOW was at 1000 at 1966, and still at 1000 in 1982)... Meanwhile earnings continued to grow... So P/E ratio got back into balance... Because of human nature, the pendulum actually swung too far the other direction, and we ended up with very low P/E ratios.

From 1982-2000, the stock market swung too far in the overpriced direction with sky-high P/E ratios... For the last 13 years, earnings have been increasing, price just a little bit. So P/E ratios have come down...

Are we ready for the next big 15-20 year bull market? Maybe not... there's a decent chance we'll have another crash first (man, that will REALLY destroy some investors... They got out in 2009, got back in 2013, then they'll get out in 2015 after the next crash)... Then maybe we'll still be at 14000 DOW around 2017, with a P/E ratio of 10 or 12 or something.

Or maybe the next big bull is starting now... Quite possible. 13 years of sideways movement and earnings growth has got some of the excess out of the system... There's a billion Chinese and Indians who are joining the middle class over the next 20 years... Who cares about Europe if you can sell razor blades to a billion new customers? We may indeed see a lot more growth ahead..

Or maybe another crash... :)

You never know.
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Re: Why is the market climbing so fast?

Postby grayfox » Thu Mar 14, 2013 2:26 pm

TRC wrote:And not that I'm complaining by any means :) , but what do you think is causing the market to reach new record highs?

Do you think it's part due to all the investors who have been sidelines for so long and are now getting back into the market with renewed confidence?

I'm also seeing lots of posts by people questioning "why bond funds" and folks stating they have very aggressive equity asset allocations with minimal bonds for their age. Seems like people are very bullish on this market rise continuing.

I'm hoping this ride continues for a long time, but just curious to hear theories on why the market is climbing at the rate it's at.


I don't think that retail investors have much impact on prices. It is the actions of the price setters that matter.

The fear index VIX is 11.57 today. That is low. I think historical average us about 19.
http://finance.yahoo.com/q/bc?s=%5EVIX& ... z=l&q=l&c=

If there is no fear, then that means Risk-On. (Not for Bogleheads, but Risk-On for the price-setters in the market.)
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Re: Why is the market climbing so fast?

Postby chipmonk » Thu Mar 14, 2013 2:52 pm

am wrote:... once we enter a more normal environment and rates start rising.

What is a "normal environment"?

As far as I can tell, every individual period in the last century has differed in some significant way from the historical "average" investing environment over the same century. WWI and WWI, the Great Depression, the Nixon Shock, the Oil Crisis, stagflation, the tech boom, the real estate bubble...

If broad correct, I think that the Efficient Market Hypothesis practically rules out the possibility of a "normal environment" existing for investors. If anyone had any idea of what a "normal environment" was and how it would evolve, they could confidently invest in whatever assets had been historically demonstrated to give good returns in exactly that environment. But of course everyone would know this, so those assets would rise in value correspondingly and... *poof*, no more normal environment.
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Re: Why is the market climbing so fast?

Postby noyopacific » Thu Mar 14, 2013 4:24 pm

Mr. Market is an extreme manic-depressive personality. Right now, his focus has mostly been fixated on buying equities.
I think it is pointless to try and figure out what is motivating him. Even though he is irrational, he can stay that way longer than I can stay solvent.

I just try to stick to a long-term plan and ignore Mr Markets wild mood swings.
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Re: Why is the market climbing so fast?

Postby InvestorNewb » Thu Mar 14, 2013 5:18 pm

I bought into equities in mid-February 2013.

In another day or two, I will have already made more than what I would for an entire year in a GIC. Not bad for less than a month being in the market. 8-)
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Re: Why is the market climbing so fast?

Postby nisiprius » Thu Mar 14, 2013 5:40 pm

"Who can explain it? Who can tell you why?
Fools give you reasons, wise men never try."
--Oscar Hammerstein, "Some Enchanted Evening," South Pacific.

Nassim Nicholas Taleb has a great story in one of his books... Ah. Found it. The Black Swan, p. 74.
One day in December 2003, when Saddam Hussein was captured, Bloomberg News flashed the following headline at 13:01: U.S. TREASURIES RISE; HUSSEIN CAPTURE MAY NOT CURB TERRORISM.

Whenever there is a market move, the new media feel obligated to give the "reason." Half an hour later, they had to issue a new headline. As these U.S. Treasury bonds fell in price (they fluctuate all day long, so there was nothing special about that), Bloomberg News had a new reason for the fall: Saddam's capture (the same Saddam). At 13:31 they issued the next bulletin: U.S. TREASURIES FALL; HUSSEIN CAPTURE BOOSTS ALLURE OF RISKY ASSETS.

So it was the same capture (the cause) explaining one event and its exact opposite.
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Re: Why is the market climbing so fast?

Postby Blister » Thu Mar 14, 2013 5:41 pm

All the big institutions want to get in before the end of quarter so it would look like they have been carrying winners all along.

Or maybe not.... :?:
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Re: Why is the market climbing so fast?

Postby Watty » Thu Mar 14, 2013 5:49 pm

chipmonk wrote:
am wrote:... once we enter a more normal environment and rates start rising.

What is a "normal environment"?



The key thing is I watch is that many interest rates are less than the inflation rate.
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Re: Why is the market climbing so fast?

Postby Professor Emeritus » Thu Mar 14, 2013 5:52 pm

More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers [many more copies of this deleted by admin alex]

Repeat until you get it right
Last edited by Professor Emeritus on Thu Mar 14, 2013 7:10 pm, edited 1 time in total.
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Re: Why is the market climbing so fast?

Postby The Wizard » Thu Mar 14, 2013 6:06 pm

InvestorNewb wrote:I bought into equities in mid-February 2013.

In another day or two, I will have already made more than what I would for an entire year in a GIC. Not bad for less than a month being in the market. 8-)

Odd that you should mention that.
I've not put any new $$$ into equities in roughly two years now, leading up to my retirement this month.
Even then, I've had to make a small transfer to maintain my AA as planned....
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Re: Why is the market climbing so fast?

Postby chipmonk » Thu Mar 14, 2013 6:17 pm

Watty wrote:
chipmonk wrote:
am wrote:... once we enter a more normal environment and rates start rising.

What is a "normal environment"?
The key thing is I watch is that many interest rates are less than the inflation rate.

So would you consider it normal to expect that you can make some small real return by keeping your money in risk-free instruments (savings accounts, CDs, short-term government bonds)?

I am young and never had any significant amount of my own money to save or invest until about 3 years ago, so negative real interest rates have seemed pretty normal to me. As a result, I don't have any cash savings and most of my 20% bonds are in munis... and I guess I consider this to be pretty normal.

I am sure I will have to rethink my bond holdings if and when risk-free rates go up significantly, just as older investors have had to rethink things in the opposite direction.
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Re: Why is the market climbing so fast?

Postby lws6772 » Thu Mar 14, 2013 6:26 pm

am wrote:Alternatives to stocks are so poor that there is no choice. I think this is artificial. I worry that market will crumble once we enter a more normal environment and rates start rising. I think there is also an element of bubble forming behavior from investors (buy high sell low). As an aside, I banked some of my stock profits and payed off my mortgage. Would feel worse if market fell and I lost this opportunity.

+1
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Re: Why is the market climbing so fast?

Postby obgraham » Thu Mar 14, 2013 7:03 pm

Investernewb:
So did you sell to take your newfound profits? They're really not there till you sell and pocket them.

If not, what will be your message when the downturn (trust me, there will be one) occurs?
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Re: Why is the market climbing so fast?

Postby Hatch Batten » Thu Mar 14, 2013 7:11 pm

HomerJ's analysis seems pretty solid; the overall price of the market is a combination of corporate earnings and p/e ratios. Q4 earnings beats were way up and the market action suggests traders are expecting another good earnings season. Combine that with the idea that retail investors will be moving their cash into the market in search of return and you have a recipe for a sharp market climb: the expectation of a good earnings trend plus the chance of higher p/e ratios. Historically this isn't even a crazy run-up in terms of its slope, but it's pretty significant against the backdrop of the past 12 years or so.

If you want to delve deeper you need to pick apart the balance sheets and contributing factors like productivity. Or on the other side, you could try to get a handle on investor psychology but good luck with that!
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Re: Why is the market climbing so fast?

Postby stevewolfe » Thu Mar 14, 2013 7:46 pm

Professor Emeritus wrote:More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers
More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers
More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers
More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers
More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers
More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers
More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers
More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers
More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers
More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers
More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers
More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers

Repeat until you get it right


Question - who are the buyers buying from? :beer
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Re: Why is the market climbing so fast?

Postby sschullo » Thu Mar 14, 2013 7:55 pm

stevewolfe wrote:
Professor Emeritus wrote:More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers
More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers
More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers
More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers
More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers
More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers
More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers
More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers
More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers
More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers
More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers
More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers More buyers than sellers

Repeat until you get it right




Question - who are the buyers buying from? :beer


From investors who also think they're smart.
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Re: Why is the market climbing so fast?

Postby InvestorNewb » Thu Mar 14, 2013 8:10 pm

obgraham wrote:Investernewb:
So did you sell to take your newfound profits? They're really not there till you sell and pocket them.

If not, what will be your message when the downturn (trust me, there will be one) occurs?


I haven't sold any shares, and don't plan to either. I want the money to keep pouring in. :moneybag

I'm hoping that when a downturn happens, I will be up by at least the same amount.
i.e. suppose there is a 10% drop at the end of the year, I want to be up >= 10%. This way I don't lose any of the original principle that I invested.
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Re: Why is the market climbing so fast?

Postby MoonOrb » Thu Mar 14, 2013 8:11 pm

This question will be a lot easier to answer in five or ten years.
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Re: Why is the market climbing so fast?

Postby EyeYield » Thu Mar 14, 2013 8:22 pm

I would be happy to explain why the market is climbing so fast, but then everybody would know and I would lose my advantage. 8-)
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Re: Why is the market climbing so fast?

Postby wshang » Thu Mar 14, 2013 9:20 pm

OMG! The train is leaving the station and I'm not onboard! (what that a sign of?) :twisted:

OMG! Where's the bottom! I should've punched out a month ago! (Buy signal) :beer
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Re: Why is the market climbing so fast?

Postby obgraham » Thu Mar 14, 2013 9:50 pm

I haven't sold any shares, and don't plan to either. I want the money to keep pouring in.

I'm hoping that when a downturn happens, I will be up by at least the same amount.
i.e. suppose there is a 10% drop at the end of the year, I want to be up >= 10%. This way I don't lose any of the original principle that I invested


I think, InvestorNewb, that you are exhibiting the type of behavior completely opposite to the Boglehead idea. You are convinced that you have timed the market superbly, and you are looking at your short term gains. A few short years ago you would have been a "daytrader".

Experience teaches just the opposite. While it is nice to contemplate how our wealth has risen these past few months, it is the long term that provides our lessons toward financial security.
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Re: Why is the market climbing so fast?

Postby careytilden » Thu Mar 14, 2013 10:03 pm

InvestorNewb wrote:
obgraham wrote:Investernewb:
So did you sell to take your newfound profits? They're really not there till you sell and pocket them.

If not, what will be your message when the downturn (trust me, there will be one) occurs?


I haven't sold any shares, and don't plan to either. I want the money to keep pouring in. :moneybag

I'm hoping that when a downturn happens, I will be up by at least the same amount.


I hope you aren't too invested in this idea (punny, eh?). I had to wait 5 years after I first started investing to get back to a break even point. Of course, I'm now zooming past it, but it would've been a sad 5 years if I was too worried about temporarily "losing" my original principal.

InvestorNewb wrote:i.e. suppose there is a 10% drop at the end of the year, I want to be up >= 10%. This way I don't lose any of the original principle that I invested.


Keep in mind a 10% increase won't offset a 10% loss, since the increase is relative to a smaller ammount, e.g., $10,000 * 0.9 = $9,000; $9,000 * 1.1 = $9,900.
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Re: Why is the market climbing so fast?

Postby avalpert » Thu Mar 14, 2013 10:48 pm

InvestorNewb wrote:
obgraham wrote:Investernewb:
So did you sell to take your newfound profits? They're really not there till you sell and pocket them.

If not, what will be your message when the downturn (trust me, there will be one) occurs?


I haven't sold any shares, and don't plan to either. I want the money to keep pouring in. :moneybag

I'm hoping that when a downturn happens, I will be up by at least the same amount.
i.e. suppose there is a 10% drop at the end of the year, I want to be up >= 10%. This way I don't lose any of the original principle that I invested.


Don't want to pile on but this is a classic example of anchoring bias that can very easily lead to bad decisions. Once you invested that original principle, other than for tax implications, you shouldn't care about it at all. The only thing that matters is the value and allocation today and how it is serving your goals/needs for tomorrow. Yesterday is past, don't keep your eye on it - it does you no good.
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Re: Why is the market climbing so fast?

Postby mojave » Fri Mar 15, 2013 4:38 pm

Divine intervention. It's no coincidence this happens around the time of a new pope. Hehe.

Hey, it's as good of a hypothesis as any :D
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Re: Why is the market climbing so fast?

Postby riskreward » Fri Mar 15, 2013 5:00 pm

[Off-topic inflammatory comment removed by admin LadyGeek]
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Re: Why is the market climbing so fast?

Postby noyopacific » Sat Mar 16, 2013 8:38 pm

I would take any effort to explain the way the market moves over the short-term with a grain of salt. Nevertheless, here is an article that I believe does a fair job of justifying the recent moves.
Am I going to make any changes in my plan?
Absolutely NOT!
"stocks are cheaper than they were at the time of the last high, and at the same time, alternative assets like bonds are much more expensive"
http://www.reuters.com/article/2013/03/ ... 1620130316
The information contained herein, while not guaranteed by us, has been obtained from from sources which have not in the past proved particularly reliable.
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Re: Why is the market climbing so fast?

Postby nedsaid » Sat Mar 16, 2013 11:22 pm

Keep in mind that from time to time the market moves up a lot in short bursts. You never know when this will happen and if you happen to miss one of these, your long-term results will be greatly reduced. When the train leaves the station, you need to be on the train. This is one reason market timing doesn't work.

This is normal behavior from the market.

I am amazed that people think that DOW 14,500 is a bubble when we are pretty much back to where we were in early 2000. We are a long ways below the NASDAQ record of approximately 5,000. How can a stock market that has been flat for 13 years be in a bubble?

A stock market that sets new records is normal market behavior. It has been so long since this has happened we have forgotten what it feels like.
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Re: Why is the market climbing so fast?

Postby linenfort » Mon Mar 18, 2013 10:57 am

livesoft wrote:We are back to the Goldilocks Economy. Some things that were repressing stock prices (Fiscal Cliff, Sequester) have not turned out to be the Big Bad Wolf. Life is Good, so the stock market reflects that.

Then it's the Red Riding Hood economy? :happy
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