Why are the markets in the USA and UK going up?

moneyfoolish

Can some of the many experts on here please tell me why on earth the markets are recovering as I see absolutely no reason why the economy for the foreseeable future will be anything other than disastrous? Companies going bust by the hundreds, unemployment in the many millions and a mountain of debt!

stuart746

This happens partly due to market stimulus measures (i.e. pumping the markets with debt derived cash), longer term the problems will remain.

DiggerUK

I wouldn't claim that markets are on the way to recovery, they are still badly hit by recent results.
Click on the relevant bourse and then look at the last five year  results..._

https://www.bbc.co.uk/news/business/market-data 

Ciprico

I am not an expert, but I have an opinion !
People having faith in their government's ability to support the markets. ( & no reluctance to print money/borrow). 
Not all companies are recovering, some, like SMT are pretty much back to pre-crash levels, whilst many others haven't significantly recovered at all, so although the index has partly recovered, the recovery is not even.
I also think some see the end in sight for Corona, certainly there is more talk now of loosening the lockdown in many countries, but maybe the same people haven't totally taken on board the new economic landscape of post-Corona...

Linton

Markets are going up because investors see the future as better than what they previously thought the worst could be.  All over the world governments are now talking about reducing the constraints.  It is far from clear that your dire predictions will actually happen.

dunstonh

Can some of the many experts on here please tell me why on earth the markets are recovering as I see absolutely no reason why the economy for the foreseeable future will be anything other than disastrous?

Share prices are not just about the now.  They are priced with 15-20 years worth of future earnings potential.  So, losing 6 months of expected income or having it reduced somewhat (or increasing in some cases) means that the share price falls.   

During the initial fall you have fear involved in the sales.  It means the good, the bad and the ugly go down by more or less the same rate.  During fear drops, the markets tend to fall more than they should (just as going up can see them get carried away at times). Then as time goes on realisation comes that things are not as bad as made out for all and some companies will start to recover. Others will get worse and fall more.      As more info becomes available, the better areas will improve and markets react.

Then you have Government stimulus.  Effectively the taxpayer is picking up a bill that the companies should have been paying. So, its free money to an extent that was not included in the share price.   There will likely be more stimulus to come in the future.   So, this will improve future profits.

2020 is going to be a rubbish year for companies.  It doesn't mean the next 15-20 years are going to be rubbish.

Companies going bust by the hundreds, unemployment in the many millions and a mountain of debt!

Companies by the hundreds when there are actually hundreds of thousands. Unemployment in the many millions whilst employment is significantly higher.  Debt is cheap and can be put off for a much longer period.   Also, a lot of companies will take advantage of this to restructure their commitments.  Take some pain now but be leaner going forward.

Financial crisis occur on average every 7 years.   The reasons differ.  The countries, companies, individuals, Governments etc and how they are affected each time will differ.   However, one thing we see time and again is that things move on. Things get better and then something else comes along to replace it.     A cycle that repeats again and again albeit with different things being the catalyst.

TemporaryUsernameMay2020

The markets have risen, but are still lower than they were before Covid-19 came to light. So they are reflecting worsened economic prospects. Are they reflecting it fully enough? Who knows? Opinions differ, and this is what makes a market.

When the markets were falling, this was (attempting to) reflect the future effects of Covid-19 on company values, not just what had already happened. So just because the future effects remain negative, it does not follow that markets should fall further. Perhaps they have re-assessed future prospects now, in the light of new information, and decided they are still bad, but not quite as bad as they appeared a few weeks ago.

Or perhaps markets were just panicking a bit too much a few weeks ago. That can happen. Or perhaps they are over-complacent now. That can also happen.

Remember that the markets consist of many companies, and the ones showing strong rises in recent weeks are not always the same ones that were falling rapidly in earlier weeks. So businesses that are relatively unscathed by the current turmoil, or even benefiting from it, are doing better than those worst affected.

Debt can be bad for the people who owe it, but can also be profitable for their creditors. Some listed companies are those creditors, and they may do well (if they don't lose too much in defaults).

The markets will, cynical though this may be, be taking into account that the economic costs of extremely bad potential outcomes will be much lower than the human costs. If most of the population do end up catching Covid-19, whether through Government incompetence or deliberate policy, then it could kill 1% or more of the population; however, most of those who die will be those who are economically inactive, so the long-term effect on the economy could be relatively small. Unlike the short-term effect on the economy of lockdowns, which is very large. (This is why some, such as Dominic Cummings (reportedly), would like to just let it rip: to avoid the large short-term economic disruption. Though that is putting it too politely: it is putting profits before people's lives.)

Thrugelmir

People will believe that the worst is over. That Government intervention across the globe has saved the day. Shares are therefore cheap to buy. When lock down ends in a couple of weeks time. The lights will come back on and normality will return.........

Socajam

Thrugelmir said:

People will believe that the worst is over. That Government intervention across the globe has saved the day. Shares are therefore cheap to buy. When lock down ends in a couple of weeks time. The lights will come back on and normality will return.........

The last part of your comment, sounds like trump

quirkydeptless

I'm getting a good sense of who the bulls and bears are on this forum 

molerat

Strange old world.  Santander announce they are not paying any dividends this year and the share price rises.