The Stock Market is Not the Economy

[JJpop]

I would take it one step further and say that none of the covid-driven employment numbers are relevant in projecting the strength of the US economy. Put differently, the unemployment rate is not the economy.

That is a very interesting opinion. So I guess in your view, as long as a group of huge tech companies keep the overall market afloat, it does not matter what happens to all the small businesses going under and jobs being lost.
The truth is that this great economy before covid was filled with thousands of companies barely making it which is why they cannot survive a few months of being shutdown. The truth is all those great job numbers were inflated with crappy low paying jobs.

 

[oneill225]

^Not defining the economy but one of the major factors. Have not run across any economist that says unemployment isn't a factor. You have some, um, unique views, will leave it at that.

https://www.google.com/search?q=ind...my&aqs=chrome..69i57&sourceid=chrome&ie=UTF-8

The April/May unemployment numbers are so skewed as to by useless in evaluating our "economy". Do you believe otherwise? Isn't the forward looking stock market a better tool/factor to use in the current environment?

In our covid world, the stock market is the economy because it is the most accurate reflection of where the economy is and where it is going. If our economy continues to improve over the next several months (which I will boldly predict will happen), then the stock market was right. Time will tell.

 

[Perryinva]

Time WILL tell. I agree with the others, though, the market is definitely not a reflection of the lasting long term average of the economy. Read the articles on the artificial boosting of the market by pump & dump online investors. This volatility is ideal for that kind of junk.

 

[oneill225]

That is a very interesting opinion. So I guess in your view, as long as a group of huge tech companies keep the overall market afloat, it does not matter what happens to all the small businesses going under and jobs being lost.
The truth is that this great economy before covid was filled with thousands of companies barely making it which is why they cannot survive a few months of being shutdown. The truth is all those great job numbers were inflated with crappy low paying jobs.

Not my view or a reflection of reality.

Of course there are many small businesses struggling to make it. Are you suggesting that this is a problem for anyone other than those small businesses? Do you believe that small businesses should be guaranteed to succeed?

Low unemployment is what leads to competition for the best workers which leads to higher wages. Seems like a good thing.

 

[EdL3]

Freight transportation units not revenue and railroads specifically are a leading indicator. Either finished or unfinished, almost everything we consume travels via rail. The numbers do not look good. CSX just fired 100 white collar workers, Union Pacific has white collar workers taking a week of unpaid vacation every month through August.

https://www.railwayage.com/freight/class-i/rail-traffic-down-but-aar-remains-optimistic/

 

[target2019]

Some are saying it is a temporary setback.

 

[Dtail]

The April/May unemployment numbers are so skewed as to by useless in evaluating our "economy". Do you believe otherwise? Isn't the forward looking stock market a better tool/factor to use in the current environment?

In our covid world, the stock market is the economy because it is the most accurate reflection of where the economy is and where it is going. If our economy continues to improve over the next several months (which I will boldly predict will happen), then the stock market was right. Time will tell.

How about in non Covid times?
I have said it before - was the stock market forward looking in the Nov/Dec 2018 period when it dropped 20% representing any level of economic activity in 2019?
The stock market is forward looking until it isn't.

 

[oneill225]

How about in non Covid times?
I have said it before - was the stock market forward looking in the Nov/Dec 2018 period when it dropped 20% representing any level of economic activity in 2019?
The stock market is forward looking until it isn't.

Stocks go up and down In non-covid and covid. Typically they go down when uncertainty or bad news arises and go up as those issues pass. These swings were extreme with the pandemic, both on the drop & the recovery. Longer term trends are a much better measure than the short-term for the reason you point out.

 

[BeachOrCity]

Skipping the stock market until the end, I would contend that economically most have not felt the real pain that lies ahead as follows:
— the bulk of unemployed make more on unemployment than they did working. Ends July 31.
— many of the employed only have jobs because the govt is giving their employer the ppp money to pay them. The PPP was calculated at about 2.5 months payroll. So that money will be running out for many later this month. Expect layoffs.
— since evictions and foreclosures we’re stopped (including commercial) most hotels and retail have stopped paying rent and mortgages. Servicers keep a reserve, for commercial services of hotel and retail expect the bad debt to hit.
— because the virus will most likely still be active expect a large portion of the service economy to be absent just due to human nature. Restaurants hotels travel, events etc will all be depressed even if fully open. Fewer people will do it.

I just don’t see any path to full economic activity which means full profits until the virus is easily treatable or preventable.

Without full economic profits stocks can trade at proportionally higher multiples (maybe true since interest rates are now lower), or they can decline.

Few companies project earnings now unless they have good news.

So maybe the overall strategy is for all companies to take huge charges in 2q, and then predict good times ahead and draw on the charges they include in 2q?? Because unless they do something like that profits will be depressed for quite a while.

 

[JJpop]

Not my view or a reflection of reality.

Of course there are many small businesses struggling to make it. Are you suggesting that this is a problem for anyone other than those small businesses? Do you believe that small businesses should be guaranteed to succeed?

Low unemployment is what leads to competition for the best workers which leads to higher wages. Seems like a good thing.

I am not suggesting small businesses should be guaranteed to succeed. I owned one for 23 years.
What you do not seem to grasp is that low unemployment with low paying jobs, where people are constantly in financial peril, is not the ideal. Explain to me why the middle class and lower have gained practically nothing the last 20 years and the rich have all gotten much richer.

 

[oneill225]

More "stimulus" is on the way. By July 31, few restaurants will still be closed and travel should kick back into gear in August. Like it or not There will not be another shutdown and jobs will be returning. I am getting a haircut next week after cutting my own for 3 months. It is all relative, but generally speaking, we are moving out of pain, not towards it. If I am correct, the stock markets will be higher, as well. A vaccine will be a huge catylst. Good time to invest.

 

[pb4uski]

The April/May unemployment numbers are so skewed as to by useless in evaluating our "economy". Do you believe otherwise? Isn't the forward looking stock market a better tool/factor to use in the current environment?

In our covid world, the stock market is the economy because it is the most accurate reflection of where the economy is and where it is going. If our economy continues to improve over the next several months (which I will boldly predict will happen), then the stock market was right. Time will tell.

IMO, you couldn't be more wrong. April/May unemployment is not useless at all, it is very relevant but just needs to be assessed differently. Many of those lost jobs are not coming back.

The stock.market is not the economy, especially with computer programs trading with other computer programs. Time will tell... and I believe it will confirm that you are totally wrong.

 

[oneill225]

I am not suggesting small businesses should be guaranteed to succeed. I owned one for 23 years.
What you do not seem to grasp is that low unemployment with low paying jobs, where people are constantly in financial peril, is not the ideal. Explain to me why the middle class and lower have gained practically nothing the last 20 years and the rich have all gotten much richer.

A lot of manufacturing was ceded to China and Mexico, among others. Wages have been rising over the past few years, however. Low unemployment tends to do that. I am sure you are pleased with the recent economy (pre-covid, that is) after all of that stagnation. Of course, the rich will also get richer so that may temper some of your joy.

 

[Helen]

A lot of manufacturing was ceded to China and Mexico, among others. Wages have been rising over the past few years, however. Low unemployment tends to do that. I am sure you are pleased with the recent economy (pre-covid, that is) after all of that stagnation. Of course, the rich will also get richer so that may temper some of your joy.

The wage growth has been stagnate except for the very top percentile:

"Wage inequality. From 2000 to 2019, wage growth was strongest for the highest-wage workers, continuing the trend in rising wage inequality since 1979.

Since 2007, the labor market peak before the Great Recession, the strongest wage growth has continued to be within the top 10% of the wage distribution.

From 2018 to 2019, the fastest growth continued at the top (4.5% at the 95th percentile), while median wages grew 1.0% over the year and wages at the bottom fell (-0.7% at the 10th percentile)."

https://www.epi.org/publication/swa-wages-2019/

 

[JJpop]

I have nothing against rich people. There are many wonderful very rich people. I would be considered rich by many.
It is the system that has to change, and hard to do when it is of course controlled by.....rich people.

I have seen and lived both sides. At age 40 I had a net worth of about $2500.
I became an entrepreneur and lived the American dream and now have no worries about money.

I am telling you the stock market is not the economy and the economy sucks for far too many people.It sucked before covid and it is a total disaster now.

However,with all that has happened recently I am predicting there will be a lot of change coming. The stars have aligned and even those want to keep the status quo are going to be forced to change. The real economy is what is important, not the stock market.

I am done.Good day and open your eyes.

 

[audreyh1]

70% of the US economy is consumer spending. If the consumer is not doing well because of reduced funds, underemployment or not out spending/traveling/doing stuff like normal due to social distancing, the economy will not recover.

Like Beach said, as long as this virus is around without good treatment or immunity from it via vaccine/herd immunity, we are stuck with a reduced economy.

 

[oneill225]

70% of the US economy is consumer spending. If the consumer is not doing well because of reduced funds, underemployment or not out spending/traveling/doing stuff like normal due to social distancing, the economy will not recover.

Like Beach said, as long as this virus is around without good treatment or immunity from it via vaccine/herd immunity, we are stuck with a reduced economy.

Agreed. Buy low because this too shall pass.

 

[Dtail]

A lot of manufacturing was ceded to China and Mexico, among others. Wages have been rising over the past few years, however. Low unemployment tends to do that. I am sure you are pleased with the recent economy (pre-covid, that is) after all of that stagnation. Of course, the rich will also get richer so that may temper some of your joy.

The rich always get richer, but certainly didn't need to be helped by the tax reform passed by this Admin. Just the individual side.
My friends were happy with it, until I asked them to calculate the net tax liability with and then without the tax law change.
Crickets....

 

[oneill225]

The rich always get richer, but certainly didn't need to be helped by the tax reform passed by this Admin. Just the individual side.
My friends were happy with it, until I asked them to calculate the net tax liability with and then without the tax law change.
Crickets....

Maybe they just didn't feel like calculating their net tax again for your enjoyment.

 

[Alan]

Too much bickering going on, the thread has lost its way.