World Economy Locked Up but Stocks Move Higher; US Cities in Flames but Stocks Move Higher

Thinking about US and worldwide events over the past few days, weeks and months. it reinforced the idea for me how irrational and fickle stock markets are.



The title of the thread is slightly misleading in the sense that while generally speaking, equities markets have been trending upwards since late March, the markets have been and still are sharply lower than all-time highs (e.g. Dow Jones Industrial average >= 30k) we were witnessing in mid February, just before COVID mania swept through the US.

Nevertheless, just considering where the US economy is right now, it's a fair question to ask how stock prices haven't continued the steep downward trajectory they were on circa early March '20.

By many economic measures, we really ought NOT be seeing the kind of "V shaped recovery" that market analysts are touting in the wake of the initial COVID market shock.

* US unemployment rates between 15-20%
* US GDP shrank by almost %5 in Q1 '20, with dire predictions for economic growth through the rest of the year
* US home sales are predicted to fall 50-60% in short term, as forecast by US online realty site Zillow

And the above figures are really just the statistical and numeric indicators that have historically plumbed economic health.

If we now pull in current situation surrounding the pandemic and how it ought to influence "market psychology", consider that:

* there is the specter of secondary + tertiary waves of COVID infections, particularly as we leave warm summer months in Northern hemisphere
* we are still many months, if not a year+ away from having access to a viable vaccine for COVID
* it may be the case that COVID will stay with our population in perpetuity as a new seasonal virus

Still not sold on a pessimistic outlook? Let's continue then:

* US and China trade war is still unresolved, with China now stating they will potentially pull back from purchase of US agricultural goods
* worldwide, it is expected in coming months that nations across the globe will ramp up sanctions and punitive action aimed at China for their role in spread of COVID
* military tensions between US & allies and China continue to simmer, with regional focus on exercises in the South China Sea

Wait Wait....THERE'S MORE

* you may have heard about this: the US is embroiled in some of the worst racial tensions and rioting since the 1990's, if not the 1960's.
* many large cities in the US have experienced crippling violence and unrest, slowing and even damaging many retail businesses
* retail giant Amazon continues to pull back delivery operations amid the riots

Oh and there's that minor detail of 2020 being an election year and all, with the main candidates from Dem and Repub sides being accused of misconduct from their opponents.

And yet after all of this negative data, bad news and pessimism... up the markets march!

If the events of the past 6 months in relation to where global equities are now (and where they seem to be heading) doesn't show how decoupled from reality stock markets have become, then I don't know what will.

Maybe the last straw will be when a 10k asteroid impacts with Earth and wipes the human race off the globe, and algorithmic trading continues with only a brief hiccup. Then it'll be clear that stock markets are no longer a mechanism to put capital to concrete use, and no longer a litmus test of national and corporate economic well-being, but instead are a wealth creation machine running off "perpetual motion".

Alas, after that nobody will be around to see the machine keep humming along.

originally posted by: SleeperHasAwakened
And yet after all of this negative data, bad news and pessimism... up the markets march!

Low rates/easy money. Solid earnings from blue chips like Walmart, Home Depot, etc.

The smart investor can still make money if they have the capital to move around eight now. The average person is screwed though, home values will drop, their real earnings will drop and they'll face other types of financial hardships as well. There are bankruptcies coming once the Covid bailout money/unemployment runs out, I already two friends that will be filing as they've lost their livelihoods and businesses.

a reply to: SleeperHasAwakened

There's money to be made when America has to be rebuilt after the fires.

originally posted by: AugustusMasonicus

originally posted by: SleeperHasAwakened
And yet after all of this negative data, bad news and pessimism... up the markets march!

Low rates/easy money. Solid earnings from blue chips like Walmart, Home Depot, etc.

The smart investor can still make money if they have the capital to move around eight now. The average person is screwed though, home values will drop, their real earnings will drop and they'll face other types of financial hardships as well. There are bankruptcies coming once the Covid bailout money/unemployment runs out, I already two friends that will be filing as they've lost their livelihoods and businesses.

The retail outlets you mention are only a segment of the equity market:

- energy sector has been getting pummeled, headlined by route of crude oil
- transportation industry, airlines in particular, is looking at transformative change & consolidation just to stay open
- entertainment, restaurants, music, movies and all ancillary industries eviscerated
- big ticket consumer goods, e.g. automobiles, are not being sold, inventory piling up

Low rates/easy money are only possible due to issuance of NEW DEBT, trillions of dollars worth as conjured into existence by the FED.

My thread wasn't a testament of how non-institutional investors can make bank in this climate, because I already am intimately aware of this. I started piling more money int stocks at around the end of March.

The point of this thread is the prestidigitation and magic tricks that are being played to make all appear normal, and markets to continue rising upward, despite mountains of negative data and bad news.

Yep, most likely the Fed Reserve is keeping the market alive and on life support. They are kicking the can further down the road. It could dip hard later this year or even into next year but for now they are not letting it.

There are stocks you can invest in when the economy is good or bad. Money can be made either way. For example, companies that do home foreclosures are showing an increase in share prices as the economy worsens.

Looks like the sacrifices worked!

I was impressed with how beltane was stretched out for a whole month this year...

a reply to: SleeperHasAwakened

Looks like you have it all figured out bro, have fun.

a reply to: TheLieWeLive

Indeed, as someone once said... "money never sleeps". There are investment opportunities and positions to take irrespective of which way the needle moves, up, down, sideways. I took some pharma positions back when vaccine work was just ramping up, and I cashed out with a tidy earning, but I likely sold way sooner than I should've.

I think the idea that the FED is propping up markets is "right on the money". It doesn't dismiss the amazement and morbid fascination I have that with so much going wrong in the world, that markets can be expanded, bloated and distended like a corpse, simply by printing more money.

"That ain't natural"

originally posted by: AugustusMasonicus
a reply to: SleeperHasAwakened

Looks like you have it all figured out bro, have fun.

Without much to go on, I'll go ahead and assume that your post is attempt at sarcasm, as I rarely, and I mean probably about 2-3% of the time, read you post anything remotely serious here.

This is the part where I'm tempted to make some condescending remarks about some of your personal info that you've shared with the forums about the 'big government shill' thread.

I'll pass on that though. I hope you're back traveling for work again and life is on the up and up. I mean that, no sarcasm here.

a reply to: SleeperHasAwakened

Share away, it doesn't bother me at all.

originally posted by: AugustusMasonicus
a reply to: SleeperHasAwakened

Share away, it doesn't bother me at all.

No, I'll decline, because that would be small of me to do so, and I quite literally need to go start work now.

a reply to: SleeperHasAwakened

Bummer. Feel free to bump the thread when you're done.

Lockdowns are ending and truthfully they started ending at the end of April beginning of May dispite what local governments where saying; people where going out and spending money ... the lines at my local (NY epicenter) big box home improvement stores where around the block.

The investor class don't live in the areas of the country that are on fire right now. The rioting might as well be in another country; it's something they hear about in the news but don't see when they look out the window.

Iv never gotten into stocks but lots of crypto sometime back

And the graphs look like a classic pump and dump

There might have been an element of that, as there were accusations of some law makers trading with privileged info (Richard Burr?) on COVID just prior to the precipitous drop in March. Mostly, though, I don't think most investors knew what to expect with the pandemic, in terms of when and how severe it'd be, and how much would be shuttered.

The markets have no reflection on the economy... The riots happening in a city, near you are thou.

Rising flames lift all stocks?

originally posted by: Bicent
The markets have no reflection on the economy... The riots happening in a city, near you are thou.

It's becoming more and more evident that you are right, the 'real' economy where goods and services are produced, and the equity markets are on a different planet. I don't know how else you explain that many people are still out of work, lockdowns are still in place, we're on the precipice of a deeper trade war, if not cold war with China, yet the markets keep going up.

"Irraational exuberance" was a term once used by a Fed chairman under Pres Clinton, IIRC.

a reply to: SleeperHasAwakened

All this really shows is how complex the US financial system and global market is.

This is why most people who try to make predictions on economic collapse or anything doom porn related, come out looking like fools because the attempt was one dimensional perspective.

Interesting note, Dow Jones was DOWN during the riots, but at Trumps message of Military force, it jumped back up 200+, like what? Wow and why?

Nonetheless, my point is, the financial system takes a multi dynamic perspective to understand, think of a perpetuating system constantly infused with cash from a variety of sources, beyond our purview.

***Some off topic points that may help with how complex our markets are and Money in general.

-It is a function of the size and depth of the US dollar capital markets and the desire of foreigners to invest in US Dollar assets.

-It cost virtually NOTHING for the United States to produce a UNIT of domestic currency.

originally posted by: Arnie123
a reply to: SleeperHasAwakened

All this really shows is how complex the US financial system and global market is.

This is why most people who try to make predictions on economic collapse or anything doom porn related, come out looking like fools because the attempt was one dimensional perspective.

Interesting note, Dow Jones was DOWN during the riots, but at Trumps message of Military force, it jumped back up 200+, like what? Wow and why?

Nonetheless, my point is, the financial system takes a multi dynamic perspective to understand, think of a perpetuating system constantly infused with cash from a variety of sources, beyond our purview.

***Some off topic points that may help with how complex our markets are and Money in general.

-It is a function of the size and depth of the US dollar capital markets and the desire of foreigners to invest in US Dollar assets.

-It cost virtually NOTHING for the United States to produce a UNIT of domestic currency.

In bold is a very good point you make.

The fact that the 10 year treasury yield is pretty stubbornly holding at ~.65%, interest rates being as low as they are, coupled with lagging commodity/crude oil prices and precious metals recovering after a small dip mid-March, points to lack of alternatives to invest in. I read that many hedge funds are starting to pour cash in stocks, buying up a lot of equity that the Fed had purchased previously.