Why has the market not tanked ?

homewardbound11 · 26-04-2020 4:11pm #1

I can’t understand why the market hasn’t tanked yet . We’re probably on the verge of a recession deeper and sharper than 2008 and yet the nyse and Nasdaq hasn’t significantly dropped or at least they are at 2019 levels .

GooglePlus · 26-04-2020 4:55pm

homewardbound11 wrote: »

I can’t understand why the market hasn’t tanked yet . We’re probably on the verge of a recession deeper and sharper than 2008 and yet the nyse and Nasdaq hasn’t significantly dropped or at least they are at 2019 levels .

Could be the big names not being as reliant on a moving workforce as companies back in the day. Business is still booming for a lot of companies and then you've stimulus packages and the prospect of further stimulus keeping markets as unspooked as possible.

I haven't a notion really and would love to know myself.

peterofthebr · 26-04-2020 5:48pm

well its different then 2008 . fed said it will do whatever it takes ..so they ARE selling treasures to buy equities[do thats keeping things up somwhat]. i feel there wont be a big market crash unless there are multiple events at once, ie little Kim dies in N.Korea, Iran attacks US Ships, second wave thats worse then the 1st meaning were back in lockdown, .

Timmaay · 27-04-2020 12:18pm

The history of recessions tells us that this is a dead cat bounce, where after the initial crash people probably panicked too much and oversold, and plenty of them had cashed out so reasonable bit of cash still floating around, the feds/central banks printing money was the kick-start to this bounce back, however it usually only is short term and when the wider realities of the economy downturn hit in it will fizzy out and it will drop back yet. The fed/central bank unlimited money printing is the main unknown however, will they, and indeed can they keep a floor under it all, and what will be the longer term implications of this, inflation is usually the immediately consequences of printing money however this less of an issue during a recession.

Also not all stocks are back up though, the energy and transport sectors are still on the floor and no sign of recovery.

P_Cash · 27-04-2020 1:02pm

homewardbound11 wrote: »

I can’t understand why the market hasn’t tanked yet . We’re probably on the verge of a recession deeper and sharper than 2008 and yet the nyse and Nasdaq hasn’t significantly dropped or at least they are at 2019 levels .

simpe, the US is printing money like they have never done before.

all to benefit business, big business.

Trump is losing the Corona battle, his only hope of reelection is to win the stock market battle.

the rich get richer.

iAcesHigh · 27-04-2020 1:29pm

On the subject: Bloomberg

Timmaay · 27-04-2020 2:51pm

iAcesHigh wrote: »

On the subject: Bloomberg

Someone needs to program the url tag to give a warning that the link behind a pay wall depending on your cookies to save you the hassle of clicking on it ha

Potatoeman · 27-04-2020 2:56pm

Oil futures were at a 10 year low. Then Iran sailed some patrol boats near a US warship, Trump issued a warning. Oil futures start to climb. You couldn’t make this stuff up.

Mad_maxx · 27-04-2020 3:42pm

Timmaay wrote: »

The history of recessions tells us that this is a dead cat bounce, where after the initial crash people probably panicked too much and oversold, and plenty of them had cashed out so reasonable bit of cash still floating around, the feds/central banks printing money was the kick-start to this bounce back, however it usually only is short term and when the wider realities of the economy downturn hit in it will fizzy out and it will drop back yet. The fed/central bank unlimited money printing is the main unknown however, will they, and indeed can they keep a floor under it all, and what will be the longer term implications of this, inflation is usually the immediately consequences of printing money however this less of an issue during a recession.

Also not all stocks are back up though, the energy and transport sectors are still on the floor and no sign of recovery.

energy stocks are 30% above the floor , the super majors are anyway

jon1981 · 27-04-2020 3:50pm

The market is still full of speculators with high levels of optimism. I think we'll need to wait for Q1 earnings and possibly Q2 to see the hangover of the lockdown. I suspect the market will continue to swing up and down for the foreseeable.

Take Zoom for example, 300m daily active users, 95% of their users are paying zero cents yet the stock price is flying... current market valuation of 49bn!!

They are priced on the assumption of perfect growth for many years to come.

If you're not playing the 3-5 yrs game right now then you're gambling.

Patsy167 · 27-04-2020 4:13pm

Fed and other central bank stimulus packages is the simplified answer. "Don't bet against the Fed"

RedRochey · 27-04-2020 4:57pm

Could be as simple as the market is forward looking while economic data is backward looking, plus the markets did drop 30% which isn't nothing

Majority of people are predicting that the economies will be back up and running by 2021 so the market is reflecting that, the market already knows that we're in a deep recession

bilbot79 · 27-04-2020 5:04pm

Can't fight the fed

sheepsh4gger · 27-04-2020 5:11pm

homewardbound11 wrote: »

I can’t understand why the market hasn’t tanked yet . We’re probably on the verge of a recession deeper and sharper than 2008 and yet the nyse and Nasdaq hasn’t significantly dropped or at least they are at 2019 levels .

dead cat bounce

sheepsh4gger · 27-04-2020 6:14pm

The prices are not falling in fiat (paper) terms because Powell at the FED just printed a trillion.

The price of gold is going up now and I'm making good money on it.

People think incorrectly about gold. The price of gold doesn't really change. The price of paper is falling because they inflated the supply of money so it takes more a55 wipe to buy an ounce.

IMHO fiat is trash and always was.

thomasm · 27-04-2020 6:23pm

There is a disconnect between markets and the real economy. Valuations and equity prices don’t make sense. They haven’t for years.

The amount of money going into the markets via central banks is frankly insane. The Fed is buying corporate junk bonds and has not ruled out buying equities !! Capitalisim is either suspended or dead.

Fed pumps money in, cash and bonds are not yielding so the Fed money buys equites. If they stop now everything collapses so they can’t and investors need to play the situation and not the fundamentals

Potatoeman · 29-04-2020 10:47am

jon1981 wrote: »

The market is still full of speculators with high levels of optimism. I think we'll need to wait for Q1 earnings and possibly Q2 to see the hangover of the lockdown. I suspect the market will continue to swing up and down for the foreseeable.

Take Zoom for example, 300m daily active users, 95% of their users are paying zero cents yet the stock price is flying... current market valuation of 49bn!!

They are priced on the assumption of perfect growth for many years to come.

If you're not playing the 3-5 yrs game right now then you're gambling.

Zoom we’re selling customer info, it’s been blocked at most Corps security depts. expect a price/valuation drop soon.

Shedite27 · 30-04-2020 8:30am

thomasm wrote: »

There is a disconnect between markets and the real economy. Valuations and equity prices don’t make sense. They haven’t for years.

The amount of money going into the markets via central banks is frankly insane. The Fed is buying corporate junk bonds and has not ruled out buying equities !! Capitalisim is either suspended or dead.

Fed pumps money in, cash and bonds are not yielding so the Fed money buys equites. If they stop now everything collapses so they can’t and investors need to play the situation and not the fundamentals

Just to add to that, in 08/09, the GDP dropped 4% but the stock market about 50%. They aren't directly correlated. This time could be the opposite, huge drop in GDP but less in shares. One falling doesn't mean the other has to also drop the same amount

ShineOn7 · 30-04-2020 9:15pm

This one is utter baffling to me too. I have savings i was going to spend on 6 months travelling that I was going to invest in Shares now instead with a view to not cash out for a minimum of 5 years

But what the hell is going on? It just goes to show you how much of this is completely engineered. We should be seeing drops below that even of 2008

Can the Fed keep throwing money at this all year?

Should i wait another few months?

Shares I'm interested in: (holding for a minimum of 5 years, maybe some for 10)

Amazon (currently soaring for obvious reasons)
Alphabet (Google)
Apple
Facebook

Maybes:

RyanAir (given the current situation, how the hell is this not at 7 Euros or even lower?)
Disney
Berkshire Hathaway class B stock

I'm looking for a share that is down 50% or more on it's January price, but has strong potential to return to well above it's January price by the year 2025

dotsman · 01-05-2020 12:36am

People need to understand that the stock market prices reflect peoples view of the future. If you want 50% drops, you need to go back to early Feb - early March. That was when there was blind panic. Pretty much all shares dropped significantly, some as much as 70-80%.

Why is the market recovering?

Because the future does not look as bleak as it did in Feb/March.
Many shares were oversold.
Many shares dropped despite the company not really being impacted by Covid (i.e. simply panic selling).
The market cap of the tech giants, and the tech industry as a whole (that aren't really impacted by Covid,- in fact, many are benefitting from it), makes up a huge percentage of the overall stock market cap. It is mainly these companies that have recovered back to early Feb mark. Airlines, travel agents, hotels etc who are really impacted by Covid are still very discounted (for good reason). Non-tech luxury items are down, but only a small amount (they'll have a poor 2020, but will likely return to normal profits in 2021).
Central Banks around the world have pumped ridiculous amounts of cash into the economy. For those with excess cash, there is no growth opportunity in deposit accounts, so a greater percentage of people's savings are making its way into the stock market. Ultimately, it's simply the expected inflation one would expect from printing tonnes of more cash.

Shedite27 · 01-05-2020 7:12am

ShineOn7 wrote: »

But what the hell is going on? It just goes to show you how much of this is completely engineered. We should be seeing drops below that even of 2008

Why? In 2008 we knew it was going to take years to restructure things, get through the debt crisis, get companies moving again etc, this time around we could find a cure/remedy in the morning and we'll be back in action.

ShineOn7 wrote: »

I'm looking for a share that is down 50% or more on it's January price, but has strong potential to return to well above it's January price by the year 2025

The problem with those shares is that there's a chance those companies go bankrupt. The obvious ones that fit your descriptions (Coke, Starbucks etc) were snapped up in March when it was oversold. Now you're either looking at Cruise Ships and Airlines that may go bankrupt, or else ones that are only down 25% on January price.

Patsy167 · 01-05-2020 10:00am

Krugman: "Investors are buying stocks in part because they have nowhere else to go. In fact, there’s a sense in which stocks are strong precisely because the economy as a whole is so weak."
What, after all, is the main alternative to investing in stocks? Buying bonds. Yet these days bonds offer incredibly low returns. The interest rate on 10-year U.S. government bonds is only 0.6 percent, down from more than 3 percent in late 2018. If you want bonds that are protected against future inflation, their yield is minus half a percent.

So buying stock in companies that are still profitable despite the Covid-19 recession looks pretty attractive.

https://www.nytimes.com/2020/04/30/opinion/economy-stock-market-coronavirus.html

1st dalkey dalkey · 01-05-2020 10:26am

Why has the market not tanked?
Two reasons combined really.
1) Lots of cash in the system with nowhere else to go.
2) The market reflects peoples view of future prospects, not today. If enough people are optimistic enough about that future to buy at current rates, the market will stay up.

The optimism bit is quite delicate at the moment, thus the need for more money from central banks to maintain the illusion.
The Fed and the ECB are now talking in trillions, each. How long can that go on?

Each can print all the money they want, but money is only as good as the value it holds. That comes back to peoples confidence and optimism. Germany in the 30's, Zimbabwe in the 90's and Venezuela today are cautionary tales.

Also, Central banks are buying bonds which are "below investment grade", remember "sub prime" in the last crash?

Add to all that, Trump is looking for WMD in some Chinese facilities. What could possibly go wrong?

Mad_maxx · 01-05-2020 11:25am

ShineOn7 wrote: »

This one is utter baffling to me too. I have savings i was going to spend on 6 months travelling that I was going to invest in Shares now instead with a view to not cash out for a minimum of 5 years

But what the hell is going on? It just goes to show you how much of this is completely engineered. We should be seeing drops below that even of 2008

Can the Fed keep throwing money at this all year?

Should i wait another few months?

Shares I'm interested in: (holding for a minimum of 5 years, maybe some for 10)
Amazon (currently soaring for obvious reasons)

Alphabet (Google)

Apple

Facebook

Maybes:
RyanAir (given the current situation, how the hell is this not at 7 Euros or even lower?)

Disney

Berkshire Hathaway class B stock

I'm looking for a share that is down 50% or more on it's January price, but has strong potential to return to well above it's January price by the year 2025

Ryanair is cheap already, if other airlines go bust, Ryanair emerges stronger, it's not like nobody will ever fly again and Ryanair have a great balance sheet compared to the industry competitors, buy it if it touches 8.10 again

Shedite27 · 06-05-2020 8:34am

Saw Michael Santoli tweet about this yesterday,
One fifth of S&P are -40%
More than half are -25%
The headline of S&P is only down ~10-15% is heavily impacted by 10 companies or so

Mad_maxx · 06-05-2020 11:42am

Shedite27 wrote: »

Saw Michael Santoli tweet about this yesterday,
One fifth of S&P are -40%
More than half are -25%
The headline of S&P is only down ~10-15% is heavily impacted by 10 companies or so

A handful of companies almost always drive gains in the market

It's why stock picking is so difficult and why not being able to buy the S+P in Ireland is so disappointing

As to why the market is going up, perhaps the money men know this covid 19 thing is vastly overblown and is more or less exclusively a disease for the old and already ill

Jim2007 · 06-05-2020 12:25pm

Mad_maxx wrote: »

It's why stock picking is so difficult and why not being able to buy the S+P in Ireland is so disappointing

Right so despite:

One fifth of S&P are -40%
More than half are -25%

You think stock picking is difficult...

This is I suppose understandable in the case of someone who regularly demonstrates that he is unwilling to do the homework and expects others to share their work with him...

There are plenty of good opportunities out there for people who are willing to make the effort.

iAcesHigh · 06-05-2020 1:40pm

Mad_maxx wrote: »

A handful of companies almost always drive gains in the market

It's why stock picking is so difficult and why not being able to buy the S+P in Ireland is so disappointing

As to why the market is going up, perhaps the money men know this covid 19 thing is vastly overblown and is more or less exclusively a disease for the old and already ill

you can always buy shares in ETF following S&P

peterofthebr · 06-05-2020 4:38pm

ShineOn7 wrote: »

This one is utter baffling to me too. I have savings i was going to spend on 6 months travelling that I was going to invest in Shares now instead with a view to not cash out for a minimum of 5 years

But what the hell is going on? It just goes to show you how much of this is completely engineered. We should be seeing drops below that even of 2008

Can the Fed keep throwing money at this all year?

Should i wait another few months?

Shares I'm interested in: (holding for a minimum of 5 years, maybe some for 10)
Amazon (currently soaring for obvious reasons)

Alphabet (Google)

Apple

Facebook

Maybes:
RyanAir (given the current situation, how the hell is this not at 7 Euros or even lower?)

Disney

Berkshire Hathaway class B stock

I'm looking for a share that is down 50% or more on it's January price, but has strong potential to return to well above it's January price by the year 2025

Warren B on TV there last week, he did not look well at all. Id be wary of airline and leasure stocks at the moment. myself.

Mad_maxx · 06-05-2020 6:19pm

iAcesHigh wrote: »

you can always buy shares in ETF following S&P

I know that but you can no longer buy american domiciled ones which means onerous taxation rules

The Tetrarch · 10-05-2020 1:16pm

The stock market was too high before the coronavirus panic.
Market Cap v GDP was 151%. Today it is 137.8% estd.

The stock market fell when the epidemic escalated, and jumped back up when the epidemic was on the wane. The epidemic became the market story.
When coronavirus is in the rear view mirror investors will realise that the market is well overvalued. Their optimism has no foundation.

Will there be company bankruptcies in the USA?
Wave of U.S. Bankruptcies Builds Toward Worst Run in Many Years. Bloomberg (two days ago)

Bob24 · 10-05-2020 2:46pm

The Tetrarch wrote: »

The stock market was too high before the coronavirus panic.
Market Cap v GDP was 151%. Today it is 137.8% estd.

The stock market fell when the epidemic escalated, and jumped back up when the epidemic was on the wane. The epidemic became the market story.
When coronavirus is in the rear view mirror investors will realise that the market is well overvalued. Their optimism has no foundation.

Will there be company bankruptcies in the USA?
Wave of U.S. Bankruptcies Builds Toward Worst Run in Many Years. Bloomberg (two days ago)

Over-optimism might play a role, but my opinion is that central banks and monetary policies play a bigger one.

I.e. many investors do see how bad the situation will be on the ground and that it will affect corporate profits, but at the same time the expect central banks to keep the funny money flowing, and they have nowhere else to go to get some yield.

Diairist · 11-05-2020 12:51pm

Such a civilized thread! Hardly any shouting and the logic makes sense.

As in an earlier comment, money actually has nowhere to go - Krugman is right. It is problematic that deflation has started in most developed economies. IMHO interest rates will have to stay low, no inflation to be choked off by raising rates (thus making corporate borrowings expensive). This will encourage share buying for what ... a few years?

Was it Mohammed El Erian that used the phrase 'destroying savings'? The lack of earnings is doing more harm to the average American that we know.

ShineOn7 · 09-07-2020 11:42am

A timely bump for this thread I think. I've savings still waiting to take a plunge but everything looks overpriced at the moment and bare zero reflection on the world economy

Have the Fed and other central bank stimulus packages not dried up yet?

Thoughts on a Q3 or Q4 crash? And I mean a proper crash, not a dip

peterofthebr · 09-07-2020 11:54am

looking at US the FED will step in if there is a crash. at the moment the only way a massive drop (like back in march) will occur before Nov is if trump himself gets covid...IMO

ShineOn7 · 09-07-2020 12:00pm

Let's say Trump wins in November, and I think he's still odds on favourite to do so, will a crash happen in December/January?

Surely at some stage the Fed stops artificially keeping it in the green

homewardbound11 · 09-07-2020 12:02pm

peterofthebr wrote: »

looking at US the FED will step in if there is a crash. at the moment the only way a massive drop (like back in march) will occur before Nov is if trump himself gets covid...IMO

If trump gets COVID the market will probably go up even further . The way this has been panning out anything is possible .

peterofthebr · 09-07-2020 12:16pm

ShineOn7 wrote: »

Let's say Trump wins in November, and I think he's still odds on favourite to do so, will a crash happen in December/January?

Surely at some stage the Fed stops artificially keeping it in the green

they cant they done this before a few years ago they said they were reducing thir holdings [fed] they had after the financial crash, the market went red quickly and the fed just kept buying[although allot more quietly]. FEd gives money to companies like blackrock to invest in key usa companies(as FEd cant buy itself] but all central banks are doing this now -so as long as there is confidence in the dollar, and they [eg: trump] decides to not pay US debt to foregn holding countries, ...so to infinity and beyond

:rolleyes:

borderfox11 · 10-07-2020 2:39am

ShineOn7 wrote: »

A timely bump for this thread I think. I've savings still waiting to take a plunge but everything looks overpriced at the moment and bare zero reflection on the world economy

Have the Fed and other central bank stimulus packages not dried up yet?

Thoughts on a Q3 or Q4 crash? And I mean a proper crash, not a dip

yeah but if there's another crash will you buy? or will you say "hmm i think this might go even lower!!!" i suspect the latter ...

this is why market timing is extremely difficult - time in the market beats timing the market, as they say

1st dalkey dalkey · 12-07-2020 11:41am

Second wave, no second wave.
Trump wins, Trump loses.
China trade war, no China trade war.
Hard Brexit, soft Brexit.

Whatever. Life goes on. Demand will exist and it will be serviced.

The really odd thing now is that in a time of excessive uncertainty the market is so high.
Normally in times of uncertainty there is opportunity in the markets to get a few bargains.
But with so much money around now there are very few bargains, in fact none that I would call bargains.

It's an odd world where money is almost worthless. Ireland borrowed at negative rates the other day, paying back less in 7 years then it borrows today. What does that say about the next 7 years?

Stormington · 12-07-2020 2:34pm

The stock market was too high before the coronavirus panic.

Too high relative to what?

Assets are repricing due to the increase in liquidity. Many traditional industries will lag as sector rotation kicks in to reflect post-Covid changes.

Wake me up after Tesla hits 2k and Apple hits 700.
Both USD figures.

Why has the market not tanked ?

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