The Stock Market is Not the Economy

[Dtail]

Quote:

Originally Posted by target2019 If none know nothing, then all know something. Some people are saying that...

Yes, I heard that a lot of people are saying.......

[DAYDREAMER]

The market must be buying Tulips.

[Fermion]

Quote:

Originally Posted by DAYDREAMER The market must be buying Tulips.

Or Teslas

[Koolau]

The Stock Market is Not the Economy:

A fever thermometer is not your health. It's reading may however suggest your state of health.

The "market" is made up of thousands of people, using their opinions as to the state of the economy. Is the aggregate of these folks correct? Probably not, but the aggregate is probably closer to right than any individual - even "experts." Which Covid expert do you still trust? I think I trust the partiers on the beaches almost as much as the Covid experts. Maybe that's the right "equivalency" to the stock market. Who knows. Looking back, the stock market has gotten it "right" and the stock market has gotten it "wrong." My understanding is that the stock market has gotten it right more often than wrong though I will stand corrected if anyone has the data (honestly, I didn't look.)

For what it's worth, dis ha'ole is moderately encouraged by the current behavior of the market and dis ha'ole has one of the lower % equity stakes in this community (roughly 30%). So, OP is correct. The market is not the economy. Now what?

[Animorph]

I agree the market seems nuts. I just posted in another thread that I went back to my normal AA after over-rebalancing towards stocks during the dip. However, I think it would be difficult for June to have negative economic growth compared to May. I'd expect some economic growth, but who knows what the market will do. I can't see why it would go beyond its previous peak, but I'm just one opinion.

[DrRoy]

It is quite possible that we have seen the economic bottom, and are now in recovery. I do think it will take a long time for the economy to reach the level prior to the pandemic, although the market is there basically now (the S&P 500 is even for the year). I am not surprised by the markets direction, but I am quite surprised by the amplitude.

[AtlasShrugged]

Here is a link to a post on the Bogleheads by a very thoughtful poster. Some of you may find his perspective helpful. His user name is Garlandwhizzer and his post appears at the bottom of page 3 of the thread. It is post #150.

https://www.bogleheads.org/forum/vie...6854&start=100

[Toocold]

Quote:

Originally Posted by DrRoy It is quite possible that we have seen the economic bottom, and are now in recovery.

^^ This is what I think. And if/when there is a second wave, we will be better prepared than when we knew nothing about covid-19, and it is unlikely that 45 states will shut the economy down in such a draconian fashion. It may get bad but nothing like the fog we were all in March.

[HF63]

It is all about the Fed and easy money that finds its way to the stock market but not where it is actually needed. No Fed help, stocks become penny stocks overnight.

[JustVisitingThisPlanet]

Consumer confidence is widely considered one of the economy driving metrics and it's low. About 50% of households have taken an income hit by either job loss or pay cut. Re-employment is often lower paying than last job. About 20M still w/out a job, employers have the upper hand with setting salary/wage. Once the $600 unemployment boost comes to an end, could get worse. And then there's the global dependency. Seems there's more downside than upside for economy over summer, which could create a snowball effect but no one knows.

[gerntz]

Quote:

Originally Posted by AtlasShrugged Here is a link to a post on the Bogleheads by a very thoughtful poster. Some of you may find his perspective helpful. His user name is Garlandwhizzer and his post appears at the bottom of page 3 of the thread. It is post #150. https://www.bogleheads.org/forum/vie...6854&start=100

Very good read. Thanks. Makes as much sense as anything I've read on the subject area, but that's not saying a lot given my knowledge level.

[gerntz]

Quote:

Originally Posted by JustVisitingThisPlanet Seems there's more downside than upside for economy over summer, which could create a snowball effect but no one knows.

If "no one really knows" is accurate, don't see how there's more downside than upside. But if downside is more likely, then somebodies know somethings. I vote for the first possibility.

[JustVisitingThisPlanet]

^Meaning there's a case for more downside but there are so many factors that no one knows. Would be interesting to see case for more upside that's enough to exceed the downsides pointed out as I haven't seen anything other than some jobs returning, which isn't enough to exceed downside.

[gerntz]

Quote:

Originally Posted by JustVisitingThisPlanet ^Meaning there's a case for more downside but there are so many factors that no one knows. Would be interesting to see case for more upside that's enough to exceed the downsides pointed out as I haven't seen anything other than some jobs returning, which isn't enough to exceed downside.

Big upside to me is the virus is unlikely to be as big a factor going forward since better treatments & behaviors are in place with treatments getting better continually.

[JustVisitingThisPlanet]

^But it already triggered a 20M+ job loss and gave employers upper hand with setting salary/wage for quite a while. At best all jobs return, which seems unlikely through rest of year - just look at all the restaurant closures. But even if all jobs return, there's significant disruption and salary/wages likely lower, meaning potentially lower consumer confidence for a while. Then there's that $600 unemployment boost that won't last forever.

[Rianne]

Quote:

Originally Posted by AtlasShrugged Here is a link to a post on the Bogleheads by a very thoughtful poster. Some of you may find his perspective helpful. His user name is Garlandwhizzer and his post appears at the bottom of page 3 of the thread. It is post #150. https://www.bogleheads.org/forum/vie...6854&start=100

The Garlandwhizzer explanation speaks to me. Especially the last paragraph. This also stands out in the opinion.

If I'm allowed to quote he/she:


"Corporate debt was at record levels before this started. Powell has said that he will do anything necessary to prevent an economic collapse and that is reassuring. It might even include, if the future turns bad, stepping in to buy stocks as the buyer of last resort. Japan has already taken that step. There is massive fiscal stimulus all over the world on top of this central bank monetary stimulus. Even Germany is making massive investment in corporations like Lufthansa to keep them afloat and prevent bankruptcies. So the market downside is limited by governmental action in both stocks and bonds regardless of what's actually happening at present in the economy. Investors fully believe the wisdom of what the late Marty Zweig said decades ago: don't fight the FED."


In Powell's 60 Minute interview he stated as much. Which leaves 2 things in limbo. What happens after the election and what happens when Powell leaves. And where does that leave capitalism? Where does that leave the 19 yr. old college grad aching to work hard and RE? The real unknown fear is nature's own way controlling the world. A tiny virus that replicates at light speed. Who will get sick? Who will die? Who will survive?

[misanman]

The 19 year old college grad is likely pretty smart and won't have a problem.

[11522914]

Quote:

Originally Posted by AtlasShrugged Here is a link to a post on the Bogleheads by a very thoughtful poster. Some of you may find his perspective helpful. His user name is Garlandwhizzer and his post appears at the bottom of page 3 of the thread. It is post #150. https://www.bogleheads.org/forum/vie...6854&start=100

Very interesting post. Thanks for sharing.

[explanade]

Powell says 9.3 unemployment by end of year and 5% GDP in 2021.

[JustVisitingThisPlanet]

^With many making less than in Feb. And many also leaving labor force since Feb, altering the real unemployment. If consumer sentiment/confidence continues to be low at end of year, could spawn a downward snowball effect.