dbr wrote: ↑Mon Jul 13, 2020 9:31 am
My portfolio value is now higher than it was in January 2020. I am a retiree actually spending money.
And yet between then and now 137,191 people have died in this country from a pandemic in which we have been totally isolated in our home from March 8 onward.
What is the understanding of how the market can maintain these prices in the face of current events?
1. The # of deaths is insignificant (not talking personally to those affected, solely from a #'s standpoint). Take a look at the % of deaths to gain perspective. Rank those deaths against total % of deaths annually. Overlay those %'s by age group to see who is leaving. This perspective would give you a better understanding of why 137,191 have absolutely no effect on the stock markets price. The numbers could be exponentially higher and would still have no effect. Also understand due to behavioral shifts, other illnesses have caused less deaths now. Think flu. Flu season in many areas was almost non-existent and deaths that occurred from it also gone.
2. Isolation in a home is not relevant. That is where your physical body is. The stock market does not care where humans sit. That humans still exist and spend is the key (to future earnings). For example, you are still eating 3 squares a day. You simply shifted your behavior from some percentage of home vs out. Now, for you, it's 100% home. Your total spend may be similar - it is not $0 because you are home. As such what you see is a dramatic shift in winners vs losers. Some stocks have gone up due to your shift in behavior while others have gone down.
3. The stock market is not
the economy. Read that again.
4. The S&P500 is not filled with mom & pop restaurants who are negatively affected during the pandemic. They have no stock and therefore are underrepresented within the S&P500. Meanwhile, groceries are represented and your shift to home eating has resulted in their stock going up. On balance, the market is still down (barely) but it shows that some companies win during a pandemic while others lose. It is not a pandemic ruins all type scenario. Some stocks are up dramatically while others are down. The net effect is a market slightly down.
5. The US (and world) have gone through many times where deaths were much higher... stock market still went up and to the right over time. Again, total deaths during this pandemic are lower, and not zero sum. It's not different this time
6. No inflation, zero % interest rates, mean money can only gain returns in certain areas. Stocks are one of those places. Hard assets are another. I posit that the stock market is actually undervalued in this environment.
BH contests: 2020 #253 of 664 | 19 #233 of 645 | 18 #150 of 493 | 17 #516 of 647 | 16 #121 of 610 | 15 #18 of 552 | 14 #225 of 503 | 13 #383 of 433 | 12 #366 of 410 | 11 #113 of 369 | 10 #53 of 282