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NSNP: Market "crash"

It's a bit hard to believe the strength of this rally. The market action seems to indicate a V shape recovery. Jerome Powell seems to be optimistic while former Fed chair's Bernanke and Yellen say no.
 
B1GTide said:
The stock market has no real connection with the economy.
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In the short term, you’re right. The stock market is a discounting mechanism, based on expectations of future performance.

That’s why it’s normally a leading indicator. It tends to dip before the economy does and rise before the economy reaches bottom.

These are not normal times because of the uncertainty injected by a bolt from the blue. When the uncertainty clears, the emotion will also be taken out, and you’ll see a more normal connection between market and economy.

Bamaro said:
The stock market now looks more like Vegas than an indication of the economy.
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In the short term, in this extremely abnormal time, this is right. It won’t hold, though.

Padreruf said:
I have been amazed at the degree to which emotion plays in the market. People get scared and run like crazy...Warren Buffett said that when the tide really goes out you can see who's been swimming naked...LOL.
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Yes, emotion plays a huge part in the short term. About 60 days ago, we were at all time highs. Then the uncertainty hit, and you saw panic. Now, while we’re at least 45 days (maybe more) from getting back to some semblance of normal, but the market consensus is that things are looking better, so you’re seeing a really nice rally.

Still, as I’ve stated several times elsewhere, I’m not convinced the uncertainty is truly clearing. A second wave isn’t at all uncommon in pandemics. After restrictions ease, whenever that might be, I’m concerned about that.

The other thing that’s bugging me is people testing positive a second time after they were thought to be recovered.

Is it a faulty test, and they weren’t really recovered in the first place? Is the virus mutating? If so, how do you construct a vaccine against multiple strains? Those questions are going to be huge for the longer-term outlook, but nobody knows the answers to any of them yet.

Through a business cycle, the financial markets get it right. In the short term, though, all sorts of things can cause extreme reactions, both positive and negative, and we’re seeing that right now.

The thing I fear is timeline of: (1) external shock, lots of fear and panic selling, followed by (2) a perceived improvement and a collective worldwide, “Whew!”, followed by (3) the return of the Balrog and dashing of feelings of relief, bringing on (4) an irrationally-negative psychological reaction (despite the fact that the possibility of a second wave is reasonably foreseeable) and panic that makes March look like a kid crying about a boo-boo on his knee.
 
4Q Basket Case said:
The thing I fear is timeline of: (1) external shock, lots of fear and panic selling, followed by (2) a perceived improvement and a collective worldwide, “Whew!”, followed by (3) the return of the Balrog and dashing of feelings of relief, bringing on (4) an irrationally-negative psychological reaction (despite the fact that the possibility of a second wave is reasonably foreseeable) and panic that makes March look like a kid crying about a boo-boo on his knee.
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I have been active in the market for 3 decades - not a ton of time, but long enough to have seen that the things that used to drive the market simply do not any more. Fear and exuberance have always produced peaks and valleys, but the pulse of the market used to be based on the performance of the individual companies whose stocks were being bought and sold. There used to be limits to how high a stock could go based on things like revenue and EBITA. Now there are no limits. People fall in love with companies and buy the stock, even if the company has never shown a profit. The stocks go up or down based on the fickle favor or disfavor of an uneducated investor base.
 
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B1GTide said:
I have been active in the market for 3 decades - not a ton of time, but long enough to have seen that the things that used to drive the market simply do not any more. Fear and exuberance have always produced peaks and valleys, but the pulse of the market used to be based on the performance of the individual companies whose stocks were being bought and sold. There used to be limits to how high a stock could go based on things like revenue and EBITA. Now there are no limits. People fall in love with companies and buy the stock, even if the company has never shown a profit. The stocks go up or down based on the fickle favor or disfavor of an uneducated investor base.
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I think the internet, ETF's and financial TV networks have changed the market and made it more volatile. The small time investors can now do the things that only the pros could do years ago. They watch the financial channels and just buy up whatever stock some guest is touting. They can use ETF's to buy or sell any index or sector during the day and even use an inverse ETF to quickly short the market. There's no need to call a broker anymore to buy or sell something and pay them a hefty commission because everything is online with unlimited trading and no commissions.
 
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Saw the picture I posted above as I scrolled through Fb earlier today - couldn't readily remember seeing anything that more succinctly showed the divide between the DJIA and the average worker (which is the real economy).

Literally spent several hours today scrolling through FB and various search strings looking for this screenshot before finally finding it on Twitter.

It's a keeper, imo.
 
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