You have to go all the way back to January 2020 to find the stock market as low as it is today!
Even after this slump, the three major U.S. indexes are all higher than they were anytime in history prior to 2020.
Part of the explanation, at least in some analysts’ views, is that stock prices are increasingly disconnected from reality: they are buoyed up by low interest rates and buybacks.
Gold, OTOH, just set a seven-year high.
Those things aren’t disconnected from reality.
When interest rates are low, investors tend to move from bonds into stocks, which causes stocks to rise, everything else being equal.
Likewise, stock buybacks reduce the number of shares outstanding generally causing the remaining shares to go up in price.
Yeah. We’re quibbling about my phrase “disconnected from reality.” The point is that stock values continue to be buoyed up even in sectors which are seeing drops in earnings.
Any smart players out there with specific advice on buying Put options? 
Hell if my crystal ball worked I’d already have my own island.
Didn’t Paul Samuelson say 50 years ago that the stock market correctly predicted 9 of the last 5 recessions?
Not sure the market is “increasingly” disconnected from things. Though maybe it is true that with computers and the internet, sudden swings can happen faster or more efficiently.
While interest rates have something to do with reality, stock buybacks in the present environment don’t. If the money came from profits that would be one thing, but the recent buybacks were funded by a tax cut that was sold as going into investment.
Would you believe 12/3/19? At the moment, with the Dow down another 340 points after being mildly positive in the morning.
Labor participation is at a 7 year high. CPI has inflation at 2.5% yearly which is average for recent history and low for history. Meanwhile wage growth is the highest it has been in a decade. What are metrics are you using as purchasing power for lower level earners?
Given that the trade war made some industries source to countries other than China, it probably had a small positive effect on the stock market. In the long term anything that disrupts global trade is going to be bad for everybody but we will have to see how bad it gets.
Many of the buybacks are funded directly by increasing long-term debt.
I don’t know how to Google to find exact numbers, but I read that a record percent of corporate debt now has specifically BBB rating — the lowest rating considered “investment grade.” Are the ratings agencies goosing their ratings again?
I thought I was being clear, but let me try again: it’s premature to say that the market has had a large reaction, because it has not yet had a large reaction. In two months, it might be fair to say it has had a significant reaction. In other words, it seems to be reacting now, with what currently appears to be back-to-back 1000 point drops, but it is still premature to call it a big reaction.
Ok, my apologies for putting words in your mouth.
It’s premature to say if it’s in chaos. It might be. And also, it pretty much was LHOD’s question. His specific questions were both about the market, but also about the real, underlying economy:
To the degree that the market is rational in the long-run, it responds to real, underlying fundamentals, and LHOD had an interesting question about whether or not there is an interesting nexus between a pandemic-based shock and the pre-existing trade war.
Labor participation has been under 64% since 2010; we’re where we were at in 1980. Real wages haven’t changed that much, either. Debt is growing. But most importantly, the gap between the rich and the un-rich is growing.
As I said, fake economy.
The trade war has hurt a lot of the smaller component manufacturers in China. They already have a very competitive market with razor thin margins, and the trade war certainly exacerbated their normally precarious situation. Supply chains had their seasonal disruption for Chinese New Year, which was extended more than a week. And now there is a massive labor shortage in the factories. The supply chain in China is going to be disrupted thru at least the end of April in the most optimistic case.
All it takes is a 20 cent spring to shut down an automotive line or a 2 cent screw to stop a laptop. These guys go bankrupt and there will be a disruption to find an alternative supplier or to increase capacity among those that don’t go bankrupt.
The labor shortage means that big players such as Apple, who are willing to pony up cash to entice workers back to the factory, will crowd out the marginal component suppliers that are bidding for the same workers.
Net net, Trumps trade war(s) have not helped the situation.
Labor force participation has been going up for the first time in 20 years, most of the decline was due to Simpsons effect and an aging workforce. The other big reason is the disability system.
Real wages have been going up at a steady rate for almost 8 years.
In a growing economy the gap between the rich and un rich will always grow. Those with 0 shares in the stock market will always have $0 but those with shares in the stock market will get richer when it goes up.
Depends on the stock. 2 of mine were absolutely crushed. Of course one is LVS so clearly I bought in at the wrong time (literally the day before Trump announced his tariffs)
Depends on the stock. 2 of mine were absolutely crushed. Of course one is LVS so clearly I bought in at the wrong time (literally the day before Trump announced his tariffs)
The fake doom and gloom about the economy that got Trump elected still runs strong. The median household is pulling in more real income than ever before, but as you see we have posters who feel it’s more important to be concerned that other people who aren’t them are doing even more betterer.
And down another 1,200 points today. Nobody can say with certainty why the stock market does anything, but coronavirus is pretty clearly the driver of this downward turn.
Again, I don’t have opinions on how trade wars intersect with the pandemic. But it’s interesting to read responses.
Dupe.
With something as complex as the stock market which could never be accurately modeled to the point where year by year much less day by day variations could be accurately calculated it’s sort of pointless to speculate.