Why is the stock market up? [thread multi-merge]

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
pcsrini
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Re: Why is the stock market up? [thread multi-merge]

Post by pcsrini »

garlandwhizzer wrote: Mon Jul 13, 2020 1:13 pm
pcsrini wrote:

The pandemic accelerated trends that were already in place:

1. Ecommerce replacing traditional retailers. Companies like Walmart & Kohls that embraced e-commerce earlier on survived. Sears, JCPenney and others declaring bankruptcy were behind the curve.
2. Streaming entertainment replacing theaters and live experiences. With the richness of content on Netflix, Amazon Prime, Hulu theaters were already in trouble, and the pandemic has accelerated this trend. Live sports may be the only exception.
3. Supply chains efficiency has increased with ecommerce and automation, lowering prices with fewer middle men from the goods produced in China to the consumers worldwide. Cloud providers have reduced operational costs. AI and automation increase inefficiency and replace workers.
4. Social media replacing print and traditional media.

The companies driving the stock market growth i.e. Facebook, Amazon, Microsoft, Google, Netflix are Apple are all big beneficiaries of the acceleration of these trends. As with any efficient capitalistic system, older inefficient models are being rapidly replaced by these companies and the pandemic has greatly helped these winners. There was a chart recently on how much of the stock market growth has been contributed by these handful of winners versus virtually no growth from the rest of the companies.

So, maybe the market is efficient, and is rewarding these winners in a big way. Unemployment due to technology advances, the reduced influence of print media, small business closures, and the decline of traditional retail were already trends - the pandemic just accelerated what was already happening.
1+

I think that sums it up pretty well. Tech and globalization have transformed our economy creating both big winners and big losers. Those who have invested in the winners have done quite well. Much less so for the losers. Apart from investing, there's a serious complex question about whether these changes are on balance good or bad for our society as a whole. Wealth disparity has also likely been increased by these forces.

Garland Whizzer
I do think that countries and economies will respond just as they did after the early 20th century industrial revolution, which gave us social security, universal healthcare (most advanced countries except here in the US) and free public education. Universal Basic Income and its various flavors are often brought up as a possible solution. If we can get this right, it can result in a better quality of life for all.
index245
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Re: How is this possible -- stock market continues to soar.

Post by index245 »

huskerfan1414 wrote: Mon Jul 13, 2020 9:48 am I think the answer is more simple than we believe.

1. People die. That's really a horribly blunt way to put it, but it is a fact of life.

2. Most people understand the death rate is really what matters and the number of "positives" is due to more testing, even of those not showing symptoms. They know the shutdown will end, and should end, soon.

3. People are investing money in the stock market. They knew #2 back in March, April, and May and so they bought bought bought and I believe there were also a lot of "new" investors or investors that upped the ante to where they should be investing (my wife being one of them).

When people invest, the market goes up. When everyone sells, it goes down. People think the economy will start up again, and are investing accordingly.
Number two is debatable.

https://www.cnn.com/2020/07/09/politics ... index.html

The answer to the OP's question is primarily the Fed's actions and (hope) that they will continue.

The secondary answer is the high concentration in the top five S&P500 companies that have driven the entire market's gains over the past three years (since 2017, I read the S&P500 minus those companies is flat...sorry, did not have time to confirm). Amazon in particular is good for this market, although I think the declining ad revenue will certainly affect Alphabet and Facebook over time.
guyinlaw
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Re: Why is the stock market up? [thread multi-merge]

Post by guyinlaw »

Interesting article from Liz Sonders of Schwab
All Right Now: But a Long Way to Go to Recover
  • When it comes to the relationship between economic data and stock market behavior, “better or worse tends to matter more than good or bad.”
  • But in today’s uniquely-traumatic economic crisis, it’s important to consider both rate of change and level.
  • It’s likely going to take a significant span of time to get to pre-pandemic levels; with the recovery likely to be more “rolling Ws” and less an ongoing “V.”
https://www.schwab.com/resource-center/ ... to-recover

Economic data very different from stock valuation
guyinlaw wrote: Mon Jul 13, 2020 2:03 pm Nasdaq is at all time high, SP500 is up ~1% today. At the same time Bonds are flat or slightly up. 10Y and 30Y rates are flat -- Fed yield control and other actions.

Its Fed's desire to keep inflating this market and keep it flush with liquidity. Day trade gamblers are helping creating stories like TSLA and other tech stocks. There is no stopping this for now.
Time is your friend; impulse is your enemy. - John C. Bogle
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SB1234
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Re: Why is the stock market up? [thread multi-merge]

Post by SB1234 »

Somehow I wasn't as wierded during the depths of the drawdown as I am now. But what do I know. :? :?
Note to self - look for hole and stick neck in it.
anecdotes are not data
7eight9
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Re: How is this possible -- stock market continues to soar.

Post by 7eight9 »

CyclingDuo wrote: Mon Jul 13, 2020 10:13 am
dbr wrote: Mon Jul 13, 2020 9:31 amAnd 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.
Hey, Disney opened - so it's all a fairy tale. 8-)

I will just address the isolation portion of your comments regarding our situation...

Not all of us have been isolated in our homes since mid March. Spouse and I have been wearing our masks every time we go out. Daily runs to grocery stores, Home Depot, Lowes, Walmart, local hardware store, etc.... seemed to be the norm in the first weeks of the shut down and never stopped. I was only out of the office for the first two weeks (and one week of that was due to Spring Break). Taught the remainder of the semester from my office over video (and spouse worked from home via video), but normal spending habits and routine picked back up in early May with eating out, bike riding, shopping, vacation trips (took one in June and another one is coming up next week), etc... . We've had an appliance repaired, lawn mower repaired, cars repaired, new set of tires put on one, etc... and certainly have been spending money in the economy.

Probably the only change yet to recover for us in terms of our lifestyle has not been going to the movies, or live performances (symphony, opera, theater) as they have all been closed.

Agreed that plenty has been impacted in the economy, but not all things ground to a halt and remained there. I do wish more people would wear masks when out and about (especially with Asia as a role model and those countries being so used to wearing masks over the years), but maybe that will be coming to help keep things moving in our country. We both get tested every week (testing provided by our places of employment).

We are learning to adapt and work around it. Fall class schedule has been changed, and the plan is all students and faculty will be in masks at all times, rotation of classrooms and cleaning of facilities and air control will be different, all of my one on one classes in particular will be taught with me in one room, and the student in another room using speakers, microphones and video. No students will be allowed to visit the offices of faculty, etc... . Still plenty to work out, but I know we all have mixed feelings about the opening of everything throughout our economy.

It is what it is.

CyclingDuo
And Hong Kong Disney is closing (again).

Hong Kong Disneyland Will Close Down Again as Cases Rise

Walt Disney will shut down Hong Kong Disneyland again after it reopened less than a month ago, as additional daily coronavirus cases confirmed by the local government rose to 52 on Monday.

“As required by the government and health authorities in line with prevention efforts taking place across Hong Kong, Hong Kong Disneyland park will temporarily close from July 15,” a Disney spokesperson told to Barron’s.


https://www.marketwatch.com/articles/ho ... latestnews

I think that everyone's take on the situation is highly dependent on where they are sitting. From where I am (Las Vegas) it looks pretty horrible and getting worse.

Headline story in today's newspaper: Boyd Gaming lays off at least 25% of workers
Boyd Gaming Corp. has laid off at least 2,500 Nevada employees as Las Vegas’ visitation numbers remain well below pre-pandemic levels.
On May 22, the casino operator issued Worker Adjustment and Retraining Notification Act letters to workers at all 29 of its properties — including its 12 operations in Southern Nevada — warning of possible impending layoffs affecting anywhere between 25 and 60 percent of employees. The company had approximately 10,000 employees in Nevada.
https://www.reviewjournal.com/business/ ... s-2073306/
I guess it all could be much worse. | They could be warming up my hearse.
Robot Monster
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Re: Why is the stock market up? [thread multi-merge]

Post by Robot Monster »

"This is not a normal recession. The recessionary part of this you're going to see down the road... You will see the effect of this recession. You're just not going to see it right away because of all the stimulus"
JPMorgan CEO Jamie Dimon
https://twitter.com/FerroTV/status/1283 ... 86464?s=19

Seems what Dimon is forecasting is not currently being priced into the market...?
“There are no answers, only choices.” ― Stanislav Lem, Solaris
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TheTimeLord
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Re: Why is the stock market up? [thread multi-merge]

Post by TheTimeLord »

Robot Monster wrote: Tue Jul 14, 2020 10:50 am "This is not a normal recession. The recessionary part of this you're going to see down the road... You will see the effect of this recession. You're just not going to see it right away because of all the stimulus"
JPMorgan CEO Jamie Dimon
https://twitter.com/FerroTV/status/1283 ... 86464?s=19

Seems what Dimon is forecasting is not currently being priced into the market...?
I don't understand why anyone would not have expected a very bumpy reopening. That said I expected bumps by the 3rd week of May so I think the bumps taking longer to appear may have engendered some unrealistic optimism in some people about how this is going to go. I expect lots of bumps and humps over the next 6-9 months but I am hopeful somewhere around Q2 2021 we will either have adapted or emerged from this with a better more efficient economy. Is that guaranteed, of course not, could things improve faster than that, possibly, and of course we could totally screw this up and perhaps take a lot longer to recover. It is a lot of unknowns to try to consider which is why staying the course would seem to be the optimal strategy for the vast majority of individual investors.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]
spcalan14
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Re: Why is the stock market up? [thread multi-merge]

Post by spcalan14 »

My guess is just market speculation.
Markets are also usually up during election years.
RetiredAL
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Re: Why is the stock market up? [thread multi-merge]

Post by RetiredAL »

TheTimeLord wrote: Tue Jul 14, 2020 11:13 am
Robot Monster wrote: Tue Jul 14, 2020 10:50 am "This is not a normal recession. The recessionary part of this you're going to see down the road... You will see the effect of this recession. You're just not going to see it right away because of all the stimulus"
JPMorgan CEO Jamie Dimon
https://twitter.com/FerroTV/status/1283 ... 86464?s=19

Seems what Dimon is forecasting is not currently being priced into the market...?
I don't understand why anyone would not have expected a very bumpy reopening. That said I expected bumps by the 3rd week of May so I think the bumps taking longer to appear may have engendered some unrealistic optimism in some people about how this is going to go. I expect lots of bumps and humps over the next 6-9 months but I am hopeful somewhere around Q2 2021 we will either have adapted or emerged from this with a better more efficient economy. Is that guaranteed, of course not, could things improve faster than that, possibly, and of course we could totally screw this up and perhaps take a lot longer to recover. It is a lot of unknowns to try to consider which is why staying the course would seem to be the optimal strategy for the vast majority of individual investors.
+1 over and over again.

I am continually surprised by how many people think "everything" can and will be done instantly and perfectly, and then expound their displeasure when a small amount bovine waste gets into ventilator. Life ( and investments ) are like is a beach, the waves coming in, the waves move out, and the sand moves around.
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firebirdparts
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Re: Why is the stock market up? [thread multi-merge]

Post by firebirdparts »

I don't understand why anyone would not have expected a very bumpy reopening.
If you just listen to what your friends and family are saying, I would say there is a lot of mass delusion about the disease itself and about consumer spending. It doesn't do much good to talk about it. Everything that could be said has been said over and over.

It's going to be a long hot summer with 10% or 15% unemployment. I think we can all agree on that. It's the dust bowl. I don't know about you, but I can tell you my credit card bill is really short.
A fool and your money are soon partners
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LadyGeek
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Re: Why is the stock market up? [thread multi-merge]

Post by LadyGeek »

I removed a post discussing the coronavirus (when schools should open). As a reminder, the main intent of the post must be on-topic, which is the stock market.

See: Please read before posting on coronavirus/COVID-19
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TheTimeLord
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Re: Why is the stock market up? [thread multi-merge]

Post by TheTimeLord »

firebirdparts wrote: Tue Jul 14, 2020 11:56 am
I don't understand why anyone would not have expected a very bumpy reopening.
If you just listen to what your friends and family are saying, I would say there is a lot of mass delusion about the disease itself and about consumer spending. It doesn't do much good to talk about it. Everything that could be said has been said over and over.

It's going to be a long hot summer with 10% or 15% unemployment. I think we can all agree on that. It's the dust bowl. I don't know about you, but I can tell you my credit card bill is really short.
Heaven help us if my friends and family are having a large influence on market performance.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]
guyinlaw
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Re: Why is the stock market up? [thread multi-merge]

Post by guyinlaw »

Fed is hard at work keeping keeping markets flush with money. By forcing the 10y and 30y rates lower, money keeps flowing from bonds to stocks.

Is this yield curve control at work or something else? Fed had discussed this ~ a month ago.

https://finance.yahoo.com/news/fed-soon ... 26098.html

Over the last month both stocks and IT/LT bonds have risen together.

Image
Time is your friend; impulse is your enemy. - John C. Bogle
aristotelian
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Re: Why is the stock market up? [thread multi-merge]

Post by aristotelian »

guyinlaw wrote: Thu Jul 16, 2020 4:15 pm Fed is hard at work keeping keeping markets flush with money. By forcing the 10y and 30y rates lower, money keeps flowing from bonds to stocks.

Is this yield curve control at work or something else? Fed had discussed this ~ a month ago.

https://finance.yahoo.com/news/fed-soon ... 26098.html

Over the last month both stocks and IT/LT bonds have risen together.

Image
Agreed. It is as if the entire financial (not economic) impact of coronavirus has been absorbed by the bond market. Essentially the Fed is keeping stock valuations level in exchange for lower expected returns and possible inflation in the future.
Seasonal
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Re: Why is the stock market up? [thread multi-merge]

Post by Seasonal »

One theory is that the market is up because tech stocks are a major part of the market and they are much less affected by covid. They don't require physical interaction and they have large overseas markets. Most of their overseas markets are much less affected by covid than the US.

https://www.bloomberg.com/opinion/artic ... h-u-s-help

Another component is that, at low interest rates, the present value of future cash flows is largely dependent on the future. Things will be better in the next year or at least the next few years. The current economic troubles are not bad enough to make a big dent in values.
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tvubpwcisla
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Re: Why is the stock market up? [thread multi-merge]

Post by tvubpwcisla »

The reason the stock market is up is because there are still discounts on really good equities from the all time highs.
Stay invested my friends.
RAchip
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Re: Why is the stock market up? [thread multi-merge]

Post by RAchip »

The market is up for the same reason that applies every time it is up: because the demand for stocks exceeds the supply. The real issue is: why is there so much demand for stock? I think the answer is obvious. The govt (fed) has made it so that there is basically nowhere else to put your money.
rockstar
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Re: Why is the stock market up? [thread multi-merge]

Post by rockstar »

guyinlaw wrote: Thu Jul 16, 2020 4:15 pm Fed is hard at work keeping keeping markets flush with money. By forcing the 10y and 30y rates lower, money keeps flowing from bonds to stocks.

Is this yield curve control at work or something else? Fed had discussed this ~ a month ago.

https://finance.yahoo.com/news/fed-soon ... 26098.html

Over the last month both stocks and IT/LT bonds have risen together.

Image
YCC hasn't been implemented by the Fed yet. But it's being discussed. Check the latest minutes.
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LadyGeek
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Re: Why is the stock market up? [thread multi-merge]

Post by LadyGeek »

I removed a post and numerous replies regarding the effects of elderly deaths on the economy. The removed posts include apologies from two members.

See: Please read before posting on coronavirus/COVID-19
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rockstar
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Re: Why is the stock market up? [thread multi-merge]

Post by rockstar »

Robot Monster wrote: Tue Jul 14, 2020 10:50 am "This is not a normal recession. The recessionary part of this you're going to see down the road... You will see the effect of this recession. You're just not going to see it right away because of all the stimulus"
JPMorgan CEO Jamie Dimon
https://twitter.com/FerroTV/status/1283 ... 86464?s=19

Seems what Dimon is forecasting is not currently being priced into the market...?
What he's talking about is people and corporations failure to pay down their debt being offset by stimulus right now. Once the stimulus ends, and the deferments to pay ones mortgage and other debt, then loans will start to go bad. The big banks have built up huge loss reserves with the expectation that these losses hit in 2021.
anoop
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Re: Why is the stock market up? [thread multi-merge]

Post by anoop »

https://www.forbes.com/sites/kevincoldi ... uy-stocks/

Can’t go wrong with FANGMAN + Blackrock.
guyinlaw
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Re: Why is the stock market up? [thread multi-merge]

Post by guyinlaw »

rockstar wrote: Sat Jul 18, 2020 11:36 pm
guyinlaw wrote: Thu Jul 16, 2020 4:15 pm Fed is hard at work keeping keeping markets flush with money. By forcing the 10y and 30y rates lower, money keeps flowing from bonds to stocks.

Is this yield curve control at work or something else? Fed had discussed this ~ a month ago.

https://finance.yahoo.com/news/fed-soon ... 26098.html

Over the last month both stocks and IT/LT bonds have risen together.

Image
YCC hasn't been implemented by the Fed yet. But it's being discussed. Check the latest minutes.
Fed doesn't have to do something itself to make it happen, at least at the start. When they talk about it, market sets it up for them, and then Fed will have to follow through as a backstop. Because if they don't that can cause very serious problems.
Time is your friend; impulse is your enemy. - John C. Bogle
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