Any News Makes Markets Go Higher

[Lsbcal]

I am struggling to say anything intelligent about this.

Will let you all know when I come up with something.

 

[dvalley]

I personally don't like it...but that's only because I'm waiting to get back into the market. I typically like my AA 90/10 but right now it's around 60/40.

 

[ripper1]

I have a nominal 50/50. Currently 53.5/46.5. I tell you, the minute it hits 55/45 I'm out of Dodge! (back to 50/50). Until then alas... nap time continues...

Was at 54.7/45.3 a couple of days ago and got out of Dodge and back to nominal 50/50. Just a tad early but...........

 

[Bir48die]

I appreciate the playfulness of some of the posters.. and their witty comments.

My question is not about AA. My question revolves around market being agnostic to any news and keep chugging higher and higher... that just seems abnormal to me.

So here's the deal:

1) Still low interest rate environment allows for more money into the market and sometimes into dividend paying stocks.

2) Many companies beating analysts expectations.

3) Movement of some shares that are involved in merger talks to beef up valuation. If talks fail they go down.

4) Generalized euphoria about the business climate and consumer confidence.

 

[ejman]

Was at 54.7/45.3 a couple of days ago and got out of Dodge and back to nominal 50/50. Just a tad early but...........

Yeah, if/when mine gets that close I might get an itchy finger as well...

 

[travelover]

I don't know either.

 

[aja8888]

I am struggling to say anything intelligent about this.

Will let you all know when I come up with something.

I'm with you and I think it's time to go to lunch right now.

 

[USGrant1962]

So here's the deal:

1) Still low interest rate environment allows for more money into the market and sometimes into dividend paying stocks.

2) Many companies beating analysts expectations.

3) Movement of some shares that are involved in merger talks to beef up valuation. If talks fail they go down.

4) Generalized euphoria about the business climate and consumer confidence.

This pretty much sums it up. Academically, a stock price is the present value of all expected future earnings. The "news" is: earnings are up, interest rates remain low, regulation is being reduced, unemployment is low (customers have money), inflation remains low. There is not a lot of bad news out there that would reduce expectations of future earnings on a macro level.

And yes, a correction is coming, but no one knows when.

 

[IMATERP]

This pretty much sums it up. Academically, a stock price is the present value of all expected future earnings. The "news" is: earnings are up, interest rates remain low, regulation is being reduced, unemployment is low (customers have money), inflation remains low. There is not a lot of bad news out there that would reduce expectations of future earnings on a macro level.

And yes, a correction is coming, but no one knows when.

I still think that the underlying factor is that the FED will protect the market nowadays. Prior to Ben B. the Federal Reserve would not dictate fiscal policy to prop up the markets, but lowering the rates to zero and adding billions to the US Economy has definitely helped the market establish a new floor. The Fed is no longer independent.

In addition, Congress can add trillions more in debt at a moments notice.

These intangibles were never present before 2009.

I

 

[YVRRocketSurgery]

I know you can't read too much into analysts comments but...

On the surface, I love that the US markets are going up. However, what concerns me are some of the stretched valuations and corresponding commentary that due to the valuation being where they are, we shouldn't be expecting great returns over the next few years. The markets have obviously shrugged that concern off so far but it worries me because I'm heading into the stretch run before retirement. I've adjusted my AA a bit because of this.

 

[mickeyd]

It is bothering me a lot - I mean a LOT!

Could it be that you have too much invested in the stock market and fear a sudden drop?


There is not too much you can do in the long term, so select an AA that fits your investment philosophy and drive on.

 

[jollystomper]

Looks like the news today is causing a drop. OH THE HORROR!

 

[kgtest]

I have some thoughts on this subject as I struggled with this as a young investor.

I was getting irritated at points when certain news I thought would move the markets down, moved it up and vice versa.

Then someone said, hey why not "take the emotion out of investing". Since I was getting emotional over this I decided to deal with it.

I thought how do I deal with this? This news that is making me emotional. So I thought, well maybe I should start tracking the news, like I track my portfolio and net worth.

For an entire year, I tracked my ending portfolio balance, AND included some snip its each day from the headlines. I started to notice a pattern... and it was completely insane.

What I realized is, it doesn't matter what the news is, the markets do what the markets do. That allowed me to understand that markets might sometimes move because of bad news, or it might not. It doesn't really matter what the news of the day is, it matters what investors are doing.


I could filter my portfolio by the gain/loss from the previous day and I started seeing that just because there was good news on a big gainer day, the next day there might be bad news but it's also a big gainer day. I realized the news had less to do with investing than I actually thought it did.

Now, if the news is that bad weather took out half the country and slowed GDP, possibly impacting markets and investor sentiment...well guess what even Hurricanes Harvey hitting Houston didn't do that. NKPR launches a nuke over japan...surely the markets will go down. US launches tomahawk's into syria...nope, still powered forward.

 

[Luck_Club]

Valuations always matter

So valuations don't matter? the fact that good or bad news makes markets go up doesn't matter?

I'm concerned we are reaching nose bleed level valuations. I'm far from good at selecting and managing marketable securities. However, I invest with 1 goal a return on my money. Too many of the marketable securities during normal times, don't return the money (profits) to the investors, these nose bleed P/E's of 30+ are really frightening. It tells me that the market or an individual stock could lose 60% of its value to get to normal P/E of 13-15...

Imagine a correction to an under valued P/E of 6. The index investors also will feel that correction at a beta

The problem is too much cash chasing too little return.

 

[audreyh1]

Just returning to a P/E of 20 would be frightening enough during the downdraft. However, I would also be OK with adding new money to equities at that level.

It's been above 20 since the mid 90s except for that exciting 2008-2009 part.

 

[NW-Bound]

I wonder about the long term effect s of automated/AI-controlled trading. How smart are those algorithms, anyway?

Computer A "thinks": I see that computers B and C have been buying. I do not want to be left behind, so I must also buy.

Computer B: I see that A is now buying. To beat "him", I must now buy more than "he" does.

Humans: I don't know what's happening, but stocks keep going up. If I sell, I miss out and get called a DMT. So, I hang on while being scared like hell, because all this gain feels phony.

 

[audreyh1]

Hmmm hasn't exactly gone up these past two days. Actually reacting negatively to some news.

 

[BeachOrCity]

IMHO the market is going up over past 12 months for two reasons
1. The very real elimination of business regulations is good for profitability
2. The anticipated business tax cuts

Always good to remember the market tends to react to what people think will happen, more than what already happened.

I also agreed with the poster whi emphasized having an appropriate aa so a correction will not derail your finances

 

[kgtest]

IMHO the market is going up over past 12 months for two reasons
1. The very real elimination of business regulations is good for profitability
2. The anticipated business tax cuts

Always good to remember the market tends to react to what people think will happen, more than what already happened.

I also agreed with the poster whi emphasized having an appropriate aa so a correction will not derail your finances

That's certainly one idea. I think it's due to wage growth and confidence followed by natural globaizational consequences...ie more volume and more traders. Of course the confidence could or could not come from your two ideas.

 

[RISP]

IMHO the market is going up over past 12 months for two reasons
1. The very real elimination of business regulations is good for profitability
2. The anticipated business tax cuts

Always good to remember the market tends to react to what people think will happen, more than what already happened.

Here in Germany, we have neither. Still, the DAX30 is up 13.35% YTD (including dividends).

I'm with luck_club: "The problem is too much cash chasing too little return."