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The stock market is not the economy... - Printable Version

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The stock market is not the economy... - BostonCard - 08-19-2020

As Kai Rysdall from marketplace likes to remind.

However, it is worth mentioning that the S&P 500 has regained all its lost ground since February and closed at a record high.  Any objective measurement of the economy now, compared to February make me think that valuation makes no sense.

Also, Apple is a $2 trillion company.  I like Apple products and all, but I just don't see it.

BC

RE: The stock market is not the economy... - DocSavage87 - 08-19-2020

(08-19-2020, 10:52 AM)BostonCard Wrote:  As Kai Rysdall from marketplace likes to remind.

However, it is worth mentioning that the S&P 500 has regained all its lost ground since February and closed at a record high.  Any objective measurement of the economy now, compared to February make me think that valuation makes no sense.

Also, Apple is a $2 trillion company.  I like Apple products and all, but I just don't see it.

BC

Kind of insane how the stock market has responded, but I guess that happens when you are pumping so much money in as stimulus.  Apple is the first $2T company and frankly, it's more fairly valued by some metrics than other high-flyers, especially Tesla.  Berkshire-Hathaway took a position in gold, which surprised some people.  The people I follow have large positions betting in this being a major bubble and precious metals going to do well, perhaps after some pullback if there's a big general stock market drop.

RE: The stock market is not the economy... - OutsiderFan - 08-19-2020

Let's have the Fed printing press stop and see what equity markets do.

RE: The stock market is not the economy... - Mick - 08-20-2020

No question it's a bubble, but it's a bubble in which people and companies/corporate leaders are deathly afraid to spend.  Or as a friend of mine said, everyone's been given a Porsche, but no one has any gas, so there's no traffic congestion.

RE: The stock market is not the economy... - chrisk - 08-20-2020

The stocks that are setting new highs are a small subset of the total universe, ones that are benefiting from COVID.

The vast majority of stocks are below their February highs, with certain categories well below their level then, including hotels, airlines, and real estate. And many of the businesses and workers that are being hurt the worst are the owners and employees of small businesses. Some of their larger competitors are able to scoop up market share at their expense.

If COVID had not intervened, we would have expected markets to have increased further by now, given the bid by politicians for votes.

And clearly, the extraordinarily low interest rates are helping support the prices of dividend-paying stocks.

If the unemployed do not get their support extended, that will reduce the money flowing to many companies, but the consensus now is that the money will continue to flow.

And finally, the Robinhood and stock slice phenomena are driving new money into already high-priced stocks.

RE: The stock market is not the economy... - oregontim - 08-20-2020

I agree that it seems bizarre to have stocks doing well while the economy crashes.



Not my expertise, but I had a good conversation with a smart investment advisor, who told me that although it is counter-intuitive, since the middle of the last century, stock prices correlate way more with two drivers than with any other factor:






So today, even while so many indicators are so disastrous, the crisis has pulled energy prices down while the 2017 tax cut and 2020 corporate giveaways pushed profits up. Still seems weird to me, but we've had that talk multiple times since the crisis, and it seems to hold up.

RE: The stock market is not the economy... - BostonCard - 08-20-2020

S&P price/earnings ratio sits at 29.1.  It has only been above 30 twice: at the end of the dot.com boom right before it crashed and in the financial crisis.

https://www.multpl.com/s-p-500-pe-ratio

BC