Do you think Dow 18,000 was the bottom?

[48Fire]

Always interesting to hear that the market is forward looking and has the negative news priced in.
Where was Mr. Market in early Feb 2020 in terms of pricing in the upcoming virus situation in America?
I just don't believe the market has the true effects priced in on the upcoming economic effects of the virus, vs. more concentrating on the virus itself.
Hopefully I am wrong.

Hmmmm, I agree with you to a large extent. The market peak was Feb. 19th, and didn't really crash until Feb. 28th. But, I think that for most of February, the market was just watching and listening to most of the U.S. saying, "We have this under control." And with only 15 cases on Feb. 15th, the market probably erred on the side of trusting that we did. Then, reality set in.

That said, I think there will be another drop after we get through the next level of denial. One, COVID-19 is not going away easily. Two, the economy has been severely damaged. Three, recovery will be painfully slow, given the combination of both one and two.

But I am wrong 51% of the time

 

[VanWinkle]

Nobody knows nothin!!

 

[Dtail]

Hmmmm, I agree with you to a large extent. The market peak was Feb. 19th, and didn't really crash until Feb. 28th. But, I think that for most of February, the market was just watching and listening to most of the U.S. saying, "We have this under control." And with only 15 cases on Feb. 15th, the market probably erred on the side of trusting that we did. Then, reality set in.

That said, I think there will be another drop after we get through the next level of denial. One, COVID-19 is not going away easily. Two, the economy has been severely damaged. Three, recovery will be painfully slow, given the combination of both one and two.

But I am wrong 51% of the time

The timing of various announcements appears to also coincide to blunt the bad news being announced at that time.
Overall, there is an all out effort to maintain the markets in this election year.
All this debt accumulation will have what effect down the road?

 

[Closet_Gamer]

Always interesting to hear that the market is forward looking and has the negative news priced in.
Where was Mr. Market in early Feb 2020 in terms of pricing in the upcoming virus situation in America?
I just don't believe the market has the true effects priced in on the upcoming economic effects of the virus, vs. more concentrating on the virus itself.
Hopefully I am wrong.

The market is scenario crunching machine that is always pricing on a risk-adjusted basis. It's never actually priced right but is always feeding in new information. There are lots of scary, black swan-ish things that go swimming by and market moves to-and-fro in response. It never prices a black swan all the way until an event happens. Nor should it. Individual investors price those things in fully or not at all, and make a killing or get fleeced in a response. And in making those decisions, they tug the market towards a collective pricing of the future.

Your belief that the market hasn't fully priced in the economic drag is reflected in your investing decisions, which provide their own small tug on the markets prices.

in February there was a still a decent chance that the virus would be contained and there was lots of other good news to go around. So the market discounted lots of scenarios simultaneously and arrived at a price for the future. One particularly grim scenario manifested itself and the market adjusted its price based on new info.

Right now the market is digesting two conflicting views (among so many other factors). Armageddon looks less likely, but not impossible, so we're off those lows. V shaped recovery appears possible, but not likely. So we have some enthusiasm.

More information to come.

If Europe stumbles as it tries to come out of this, down we go. If Europe comes out gracefully, up we go. Also New York. And then there is new Chinese city in lockdown. And a US election. And the world is awash in debt. And bond yields are negative in some places.
And the dollar is strengthening...and...and...and...so many things to price in!

 

[BeachOrCity]

Okay so let's take this situation with forward thinking concept.
The market returns to 3300 S&P in a few months.
Now let's compare the 3300 market in mid Feb with a 3300 June market let's say.
If the market is truly forward looking, can anyone say that the forward looking 6 month concept in June (Dec 2020) is expected to have all the economic damage corrected and go back to the Feb levels to justify the same price as what was back in Feb?

ETA -what we are basically saying is that it doesn't matter how much bad news there is, as long as the bad news was expected.

People can ask themselves one question:

At 2780 S&P 500 is there more downside or upside possibility in the next year?

For me the risk is losses at these price points. Where that flips to risk is missing out on gains is different for everyone I suppose.....but I would think few informed investors would think the current price point today has much upside in the next year.

 

[Toocold]

For me the risk is losses at these price points. Where that flips to risk is missing out on gains is different for everyone I suppose.....but I would think few informed investors would think the current price point today has much upside in the next year.

I agree with you, unless there is a treatment or vaccine breakthrough. I think, given the run, the market is starting to price in a treatment sooner than later -- and I'm sure a few have a preview of the clinical trials going on. I think the market is already starting to price in more fiscal stimulus. Oil cuts are already priced in now..

 

[RunningBum]

People can ask themselves one question:

At 2780 S&P 500 is there more downside or upside possibility in the next year?

For me the risk is losses at these price points. Where that flips to risk is missing out on gains is different for everyone I suppose.....but I would think few informed investors would think the current price point today has much upside in the next year.

I don't have a one year horizon.

You may be right that there's more downside, but if you get out, and it goes up, when do you decide to finally get back in? You may be even more convinced it has to go down and stay out of the market even longer, which might put you at risk of getting back in even higher.

I don't have that risk if I just stay invested. I may be missing out on some gains by not getting out now and back in at a lower price, but if things go well I don't have to worry about when to get back in, because I've stayed in. I only lose if the market stays low until I finally need to sell for living expenses. I feel like trying to squeeze a few more % gains this year puts my long term plan more at risk than just holding to my AA.

 

[Beststash]

Overall, there is an all out effort to maintain the markets in this election year.
All this debt accumulation will have what effect down the road?

I think you nailed it. Can we can financially engineer our way out of this? That is the real question and it will be quite telling for a lot of future issues.

 

[Freedom56]

I don't have a one year horizon.

You may be right that there's more downside, but if you get out, and it goes up, when do you decide to finally get back in? You may be even more convinced it has to go down and stay out of the market even longer, which might put you at risk of getting back in even higher.

I don't have that risk if I just stay invested. I may be missing out on some gains by not getting out now and back in at a lower price, but if things go well I don't have to worry about when to get back in, because I've stayed in. I only lose if the market stays low until I finally need to sell for living expenses. I feel like trying to squeeze a few more % gains this year puts my long term plan more at risk than just holding to my AA.

You missed out on a lot of bargains in the fixed income market. Many of the corporate notes I picked up during the big sell-off at bargain prices are up 22-30% plus interest as of this morning. I will be selling some of those positions soon and wait for the next sell-off. Those stupid bond funds that were selling debt at 75 to 85 cents on the dollar three weeks ago are busy buying them back over par. They have done this countless number of times and as long as the sheep continue to buy these corporate bond ETFs and funds and do their silly re-balancing dance with their, equity funds, I will continue to add to my wealth.

 

[VFK57]

All this debt accumulation will have what effect down the road?

Adding huge additional Debt to already swollen Feds balance sheet of over $3 trillions means only one thing: there will be far greater inflation at some point.

 

[razztazz]

This notion of pricing-in is as ephemeral

If that is the case, how do you account for the large drop in the stock market when the retrospective unemployment rate was still 3.4% and the number of deaths was still under 100 in mid march?

Not sure what you saying but it looks like your statement is corroborating what I was saying.

 

[brewer12345]

The market is now completely disconnected from reality. Looks more like a scratch off lottery ticket than anything else.

 

[targatom2019]

FOMO time for many.

 

[VFK57]

A fear of big inflation, triggered by the Feds QEs, push many investors back into the market and purchasing other assets.

 

[MRG]

The market is now completely disconnected from reality. Looks more like a scratch off lottery ticket than anything else.

That's exactly what I believe. I opened this thread to post those words. Market already seemed too hot then a needed correction followed by a pandemic. I don't know where the bottom is, nor can I predict how long till "normal" returns or even what normal means. I may use the bounce to augment my cash.

 

[REWahoo]

I may use the bounce to augment my cash.

I'm guessing a substantial number of investors are planning on doing the same. Expecting a big sell-off later today.

 

[USGrant1962]

Adding huge additional Debt to already swollen Feds balance sheet of over $3 trillions means only one thing: there will be far greater inflation at some point.

The response to the financial crisis added $8T (or +80%) to the debt and we didn't get far greater inflation. Why would adding $3T (or +15%) do so now?

 

[OldShooter]

The response to the financial crisis added $8T (or +80%) to the debt and we didn't get far greater inflation. Why would adding $3T (or +15%) do so now?

That bartender from Brooklyn, macroeconomic expert extraordinaire, says it's no problem.

 

[brewer12345]

The response to the financial crisis added $8T (or +80%) to the debt and we didn't get far greater inflation. Why would adding $3T (or +15%) do so now?

I am seeing estimates of a 20 percent deficit this year, which would be about 6 trillion. Then add in who knows how many trillion being printed. This is the carfentanil to the heroin of 08 09.

 

[dd564]

This market rebound is good to see.

It's probably due to the benefits of the stimulus package via increased unemployment federal issued checks.

Another stimulus package for the next wave of unemployed will be needed to keep the market on it's upward rise.


More stimulus checks = more consumer spending = stronger banks = stronger businesses.

 

[sheehs1]

I am seeing predictions of 26% GDP contraction and a 36% decline for Corporate profits for the second quarter. Source Wall Street Journal. Problem is the longer we stay shut down, the worse this gets and the more the Fed and Government inject and asset buy.

Much damage has been done to the psych of American Citizens. If things reopen, how fast will they return to work or will they simply wait until their unemployment runs out. Isn't that paying out for 4 months? There is much to think about and consider.

 

[unclemick]

History says that agreement won't come until a few months after it happens - too late to be of much use to those hoping to "get in at the bottom."

But since this time is different, we may know the bottom immediately - especially if it is around 0.

Not to cross thread but wasn't there a fella named Angus Maddison who tabulated long term success/disappearance of markets in various countries. I can't remember where (W. Bernstein?) his name often popped up.

heh heh heh - I think this data is still kept current ? Wiki.

 

[OldShooter]

I am seeing predictions of 26% GDP contraction and a 36% decline for Corporate profits for the second quarter. ...

From a source with a demonstrated history of successful economic predictions? I doubt it. That room is empty.

 

[Dtail]

The market is now completely disconnected from reality. Looks more like a scratch off lottery ticket than anything else.

I agree and you have a good rep on this site.
So (I don't remember), when there were 2 false starts of an upwards market in 2008 before finally settling to the lowest point, was the feeling the same as now?

 

[RobLJ]

Harvesting Gains from Bottom or Locking in Losses?

About an hour ago, I sold about 35% of the bounce up from the bottom a couple weeks ago. I'm now sitting at about a 1.5% "loss" from this date last year, largely since in Jan and mid Feb I scraped about 60% of last year's gains to cash or short-term bonds.

It will be interesting to see if we go back down to test those "bottom levels" over the next few weeks (if so I'll put 1/2 of this additional cash to work to keep at the 40% stock level), or if the Fed/Congress actions will continue to move the market up. If it continues to recover, I'll probably sell 1/2 of those gains every 5% up.

This will put me a couple percent above my "lower band" of 40% for stock allocation. Normally, I would just watch, but my part-time online gig runs out in September, with 3.5 years until I qualify for full SS. At that point, I'll increase my stock allocation back up to the 50-55% range.

I suspect the market will continue to be hugely volatile, with large gaps up with news of Fed/Congress and NY hopefully plateauing, and large moves downward as the seriously ill/hospitalization numbers begin peaking in the South and MidWest. I'm hoping not for an "all-clear" in early May, since I suspect that will just set us up for another round of exponential infection increases, but we will see. The news that the Feds are closing down their testing I see as really bad news for how the US is "handling" the infection (in my view, ubiquitous testing and probably a serological test to identify recovered with immunity are going to be needed before much easing of the stay at home orders). The good news is that the current measures are working to control the spread to half tolerable rates (although this is unclear without ubiquitous tests, so we have to go on deaths). Basically, we don't know a lot.

I'm also skeptical of the rate of small business recovery and consumer demand due to unemployment, but I'm hoping I'm wrong on these two points.

I don't advocate others to do this, since I'm right now entering the high risk period of no income and before my and DW (who is younger) SS age and I view the risks of a continued plunge this year and next as the key sequence of return factor. At worst, I'll file a few years early for SS and we have a lot of slack--no travel this year, so that big part of the budget can go towards next year's expenses. We just finished replacing the floors downstairs, so hopefully the house spending is largely over (after the solar panels and EV car last year).