The Markets

[imoldernu]

Purely Curiosity.
As a non-investor, the Stock Market has become a mystery to me. With new records, every day, there has to be confidence... somewhere.
Would love to hear explanations for this.

Not asking for recommendations or predictions... just your opinion as to what is driving the increase.

 

[Crewer]

I listened to Marketplace last night where there was a segment about possible tax package that Trump will propose (details unknown, of course) and they played a segment with Trump talking about encouraging offshore $ to come back to US. Marketplace said when tax law related to this was last changed to encourage those profits to be brought back to US, companies did repatriate the money. But they used most of the money to buy back shares instead of investing in new production etc.

I wondered if movers and shakers in the market are pricing in big sock buybacks after a tax package is passed (if it's passed, if.., if.. etc)

 

[Blue Collar Guy]

Purely Curiosity.
As a non-investor, the Stock Market has become a mystery to me. With new records, every day, there has to be confidence... somewhere.
Would love to hear explanations for this.

Not asking for recommendations or predictions... just your opinion as to what is driving the increase.

Some one read my post on social security assets being invested in the stock market. The newly created demand would make the prices skyrocket.

 

[Spock]

Central banks have pumped $2TRILLION YTD into the markets.... gotta keep those balloons inflated.
BofA: $2 Trillion YTD In Central Bank Liquidity Is Why Stocks Are At Record Highs | Zero Hedge

 

[CaliforniaMan]

Because this is the price level that investors collectively think it is worth. Ask why, and you will get as many answers as there are investors.

 

[LOL!]

The economy has been doing great at least through 2016. Here is a report:
https://www.washingtonpost.com/busi...26905e-97de-11e7-b569-3360011663b4_story.html

The incomes of middle-class Americans rose last year to the highest level ever recorded by the Census Bureau, as poverty declined and the scars of the past decade’s Great Recession seemed to finally fade.

Median household income rose to $59,039 in 2016, a 3.2 percent increase from the previous year and the second consecutive year of healthy gains, the Census Bureau reported Tuesday. The nation’s poverty rate fell to 12.7 percent, returning nearly to what it was in 2007 before a financial crisis and deep recession walloped workers in ways that were still felt years later.

So if incomes are "the highest level ever recorded", then it stands to reason that the stock market should also be at the highest level ever recorded. Pretty simple it seems to me.

It also helps that "the rate of Americans lacking health insurance to be at its lowest ever last year, ...."

 

[flyingaway]

Every pullback has been bought up. It seems that people have gotten used to the upwards market. I have friends who have been out of the market since last year and are waiting for a serious correction to jump in.

 

[Onward]

Ours is not to reason why. Ours is but to invest or eat cat food.

 

[CountryGal]

I would like to correct AA, but hesitate if prices are super inflated at this time. Have been holding back...

 

[GrayHare]

"Don't fight the Fed." When the Federal Reserve has an easy money policy (pushing for low interest rates) that stimulates the economy, which increases business earnings and drives up stock prices. When the Fed does the opposite, has a tight money policy, that restricts the ability to borrow and thus dampens earnings and stock prices.

 

[Onward]

Every pullback has been bought up. It seems that people have gotten used to the upwards market. I have friends who have been out of the market since last year and are waiting for a serious correction to jump in.

I would like to correct AA, but hesitate if prices are super inflated at this time. Have been holding back...

 

[razztazz]

I would like to correct AA, but hesitate if prices are super inflated at this time. Have been holding back...

Wouldn't that be a good reason to adjust your asset allocation now?

Unless you're talking about buying more stocks

 

[RetireAge50]

People buy stuff for more than it costs to make so stocks go up. Also goes up with inflation.

 

[SecondCor521]

As an amateur watcher of the markets, I think market sentiment is a funny thing, and someone's personification of them as a bipolar guy who is either deliriously happy or depressed is pretty accurate in this way: Right now the markets are happy and are shrugging off any bad news. Someday, the markets will be depressed and shrug off any good news.

Why this happens, I've no idea. What causes sentiment to shift, I've no idea. It does seem, in my study of history, that the shifts are usually due to news items that don't really seem like they should cause a sea change. It also seems that these items are not usually ones that people were predicting. For example, the "Asian contagion" crash in the late 90's was not predicted by many. The mortgage-related crash in 2008-9 was seen by a few and probably obvious in retrospect, but the topic IIRC did not dominate the news headlines before things actually started unraveling.

As someone above posted, monetary policy can be a powerful force, and it does seem to me as though interest rates will probably need to be raised soon as inflation is likely to pick up soon. But I do like Yellen's data-driven policy even if it is less predictable.

I think the markets are high now because companies seem to be doing well and earning money. Why companies are doing well and earning money is more of a puzzle - labor costs are probably still lower than they otherwise would be as unemployed people return to the workforce and are just thankful for a job. Regulation changes and the possibility of tax reform, especially the corporate tax rate reduction and repatriation ideas, are probably driving stock prices up somewhat.

It could also be momentum. People with cash on the sidelines see the market going up for a few months, and they decide to join the party with some of their dry kindling, which results in the market going up more.

I like the high stock prices, but I do think we are beginning to form something of a bubble. How long it will last, how high it will get, and how bad it will be when it will pop are anyone's guess. I have my opinions, but as I said at the outset, I am just an amateur.

 

[Blue Collar Guy]

Every pullback has been bought up. It seems that people have gotten used to the upwards market. I have friends who have been out of the market since last year and are waiting for a serious correction to jump in.

Well, I think the market is up 25 % since last(2016 January). So your friends need a 25 % correction just to get back on even ground. Then when will they pull the trigger to reenter?

Tell them the BCG said buy now, a little every week, they missed a nice rally, they might wait for ever.

 

[DrRoy]

The economy continues to grow, as does corporate earnings.

 

[naux_one]

I guess there is always those who talk about gloom and doom and how the markets are going to correct themselves. The markets always make corrections some big some small. You have to know what you're putting your money into, which a high percentage of people don't and then get upset when the stock loses.

 

[RobbieB]

Well, there's no dough to be made with bonds and CD's eh?

 

[jollystomper]

The market tends to be a leading indicator. Many are betting that there will be more "business friendly" policies (like the tax cut mentioned above) with potential to increase earnings, so they think that the upward run will continue. Companies seem to be hiring more (though one can argue whether or not they are hiring at higher wages/benefits than in the past). Though North Korea is a wildcard, the apparent feeling that China and Russia are at least publicly supporting sanctions against them (who knows what is being talked about in the back rooms of diplomacy) makes them seem like more talk and less action. Interest rates are up but so little that folks do not seem very worried, in fact it seems if the Fed does not raise rates there is more concern, due to the feeling that the economy is slowing down.

Just my opinion. Personally I still follow Mr. Buffet's "be fearful when others are greedy, and be greedy when others are fearful" rule.

 

[nash031]

The market tends to be a leading indicator. Many are betting that there will be more "business friendly" policies (like the tax cut mentioned above) with potential to increase earnings, so they think that the upward run will continue. Companies seem to be hiring more (though one can argue whether or not they are hiring at higher wages/benefits than in the past). Though North Korea is a wildcard, the apparent feeling that China and Russia are at least publicly supporting sanctions against them (who knows what is being talked about in the back rooms of diplomacy) makes them seem like more talk and less action. Interest rates are up but so little that folks do not seem very worried, in fact it seems if the Fed does not raise rates there is more concern, due to the feeling that the economy is slowing down.

Just my opinion. Personally I still follow Mr. Buffet's "be fearful when others are greedy, and be greedy when others are fearful" rule.

So what are people now? Many on here seem to be waiting for the next crash, yet the rising prices indicate the market writ large is hopeful.

 

[jollystomper]

So what are people now? Many on here seem to be waiting for the next crash, yet the rising prices indicate the market writ large is hopeful.

I do not seem folks so much as "waiting" for the next crash as not being surprised that a crash/downturn/bear market will happen. It likely does not mean they are trying to financially avoid it, but just be prepared to weather it out, however long or short it may be. At least, that is how I am handling it, I cannot speak for others.

Being "fearful" in Buffet's quote does not necessarily mean being afraid... it means more, in my view, to "respect the market and what it can do", and be prepared.

 

[RobLJ]

Who knows? (not me) But
1. low/slow growth; low inflation; low yields make stocks look good
2. companies are buying back stock rather than investing in new production, which low interest rates/inflation continue to encourage
3. treasury yields
4. maybe some return chasing as people stick their toes back in the market after 2008

Since early 2015, I keep shaving returns to keep at the low end of stock allocation given the PE of US stocks (allocation now ranges from 58-61%--60% now--; usually I rebalance to 62-63% after the allocation hits 65-66% or 58-60%), rebalance into bonds and from US to international stocks, and raise cash. At some point, I'll have to put some cash back into stocks after the Great Correction, maybe. If it ever comes. . . The rebalancing into international surprisingly seems to finally be paying off this year, for some reason (Europe is finally growing, perhaps).

Purely Curiosity.
As a non-investor, the Stock Market has become a mystery to me. With new records, every day, there has to be confidence... somewhere.
Would love to hear explanations for this.

Not asking for recommendations or predictions... just your opinion as to what is driving the increase.

 

[Scuba]

Well, there's no dough to be made with bonds and CD's eh?

Exactly

 

[YVRRocketSurgery]

IMO, there is healthy skepticism of the markets. However, continued earnings and revenue growth, even if unspectacular, will generally help push the market upward, though not necessarily prevent a correction or crash. The low interest rates/yields don't hurt either.

 

[DrRoy]

Just my opinion. Personally I still follow Mr. Buffet's "be fearful when others are greedy, and be greedy when others are fearful" rule.

So what are people now? Many on here seem to be waiting for the next crash, yet the rising prices indicate the market writ large is hopeful.

People who are waiting for a crash or even a correction are fearful. Markets rise when there is still uncommitted money that keeps coming in. They fall when the fear is gone and there is no one left to buy.