04-17-2020, 09:19 AM
(04-17-2020, 08:41 AM)OutsiderFan Wrote: I'm I misguided in my assumption here? Please correct me if I'm wrong, but 15% unemployment and depression forecasts should not give us a stock market going up in value, especially considering the gigantic changes the economy is going to convulse through and evolve into over the next year or more, regardless of what governments do or don't do to manage the pandemic.
In a rational market where prices are tied to corporate profits (or even expected profits), you would be correct. However, due to many factors (government interventions being a primary one) that has not been true for many years (Maybe 50 or so, but much worse after 2008). Right now, and over the past 15 years at least, there was so much cash out there with no "real" place to go that stock was considered the only outlet. However, lots of that "cash" was created by unrealistic stock prices. People were making money on paper, but not in reality. The "Greater Fool" theory was in full bloom. Now we will see if that insanity can continue or if a real big "correction" must happen.
Sadly, about this issue Trump's approach may be correct. It is not what is true that matters, but rather what investors THINK is true that matters.