Autumn Stock Market Crashes / Second wave

sebtomato

Linton said:

sebtomato said:

MinuteNoodles said:

sebtomato said:

As a second Covid-19 wave in the Autumn/Winter looks very likely, I guess we can brace ourselves for another stock market crash.

Nope. The markets already factored the possibility in months ago, a second pandemic is factored in the price already.

Read the following and inwardly digest.

https://theescapeartist.me/2020/06/09/its-in-the-price-the-stockmarket-has-already-taken-that-stupid-internet-article-into-account/

How can the stock market already factored in something unknown? What about a vaccine available? Is that already factored in? By when?
I am pretty sure that if Covid-19 triggers some large scale lockdowns in several countries, the stock market will crash again.

If everybody was as sure as you as to the future then they would already have sold, no-one would want to buy, and prices would have collapsed.  Since that hasnt happened, most investors clearly don't share your views although some may with some affect on prices. That is what is meant by being priced in.  

Do you really believe that you have been granted a special insight into the future not available to most other people?

Personally, I have not got the faintest idea as to what will happen.  Therefore it makes sense for me to invest broadly so that barring global economic collapse I wont get wiped out.  

Why do you think I have been granted a special insight into the future? My point was: the stock market hasn't been able to factor in all the alternatives by definition, and a second wave is one of those. Another poster said that a second Coid-19 wave had already been factored in by the stock markets.
My current conclusion is: the US tech companies are doing very well, because there are no other places to invest money. It's just supply and demand, as opposed to the actual financial performance of those companies.

Linton

sebtomato said:

Linton said:

sebtomato said:

MinuteNoodles said:

sebtomato said:

As a second Covid-19 wave in the Autumn/Winter looks very likely, I guess we can brace ourselves for another stock market crash.

Nope. The markets already factored the possibility in months ago, a second pandemic is factored in the price already.

Read the following and inwardly digest.

https://theescapeartist.me/2020/06/09/its-in-the-price-the-stockmarket-has-already-taken-that-stupid-internet-article-into-account/

How can the stock market already factored in something unknown? What about a vaccine available? Is that already factored in? By when?
I am pretty sure that if Covid-19 triggers some large scale lockdowns in several countries, the stock market will crash again.

If everybody was as sure as you as to the future then they would already have sold, no-one would want to buy, and prices would have collapsed.  Since that hasnt happened, most investors clearly don't share your views although some may with some affect on prices. That is what is meant by being priced in.  

Do you really believe that you have been granted a special insight into the future not available to most other people?

Personally, I have not got the faintest idea as to what will happen.  Therefore it makes sense for me to invest broadly so that barring global economic collapse I wont get wiped out.  

1) Why do you think I have been granted a special insight into the future? My point was: the stock market hasn't been able to factor in all the alternatives by definition, and a second wave is one of those. Another poster said that a second Coid-19 wave had already been factored in by the stock markets.
2) My current conclusion is: the US tech companies are doing very well, because there are no other places to invest money. It's just supply and demand, as opposed to the actual financial performance of those companies.

1) The markets have factored in the majority view of the probability and likely consequences of what may happen. This seems to be that, in general, the economic effects of Covid are not long term.  Do you know better? 
2) Share prices are always determined by supply and demand, there is nothing else.  Supply and demand is partially driven by actual financial performance but more often, and particularly at the moment,  by people's belief in future financial performance. Consider Tesla.  

EdGasketTheSecond

The markets aren't factoring anything in at the moment; they are simply in a bubble created by QE and stimulus. Real returns on bonds are negative so the excess currency finds its way into the stockmarket which is in complete disconnect with reality.

Sailtheworld

EdGasketTheSecond said:

The markets aren't factoring anything in at the moment; they are simply in a bubble created by QE and stimulus. Real returns on bonds are negative so the excess currency finds its way into the stockmarket which is in complete disconnect with reality.

They're not pricing in anything but they're pricing in QE / stimulus & the lack of real returns elsewhere?

webjaved

My advice would be to ride whatever storm there may be and carry on investing, the market will bounce back, but will do slowly.

bowlhead99

Sailtheworld said:

EdGasketTheSecond said:

The markets aren't factoring anything in at the moment; they are simply in a bubble created by QE and stimulus. Real returns on bonds are negative so the excess currency finds its way into the stockmarket which is in complete disconnect with reality.

They're not pricing in anything but they're pricing in QE / stimulus & the lack of real returns elsewhere?

Yes, that sounds to me very much like they are pricing in the prospects for the stocks and the prospects for other alternate uses for investors' capital (which could include investing in other companies, or investing in bonds, holding cash, gold, oil contracts, etc etc).  If they weren't 'factoring anything in at the moment', why would it be the case that MSFT and AAPL are getting more expensive while oil and banking and hospitality businesses are getting cheaper?  Income, yield and growth is scarce at the moment but the companies that offer it are getting higher values and the companies that do not, are not.

A rising tide floats all boats, as they say, so QE and stimulus money has supported equities generally from being where they would be if there hadn't been QE and stimulus. But it doesn't seem irrational to price companies higher if the risk of their failure is being countered with countermeasures.

Linton

EdGasketTheSecond said:

The markets aren't factoring anything in at the moment; they are simply in a bubble created by QE and stimulus. Real returns on bonds are negative so the excess currency finds its way into the stockmarket which is in complete disconnect with reality.

There is no "disconnect with reality", QE and stimulus is part of the reality. 

EdGasketTheSecond

Linton said:

EdGasketTheSecond said:

The markets aren't factoring anything in at the moment; they are simply in a bubble created by QE and stimulus. Real returns on bonds are negative so the excess currency finds its way into the stockmarket which is in complete disconnect with reality.

There is no "disconnect with reality", QE and stimulus is part of the reality. 

But the 'disconnect' is when QE and stimulus are the only things driving the market. I'd say zombie companies kept afloat and PE's of over 1000, and PE's and market cap compared to GDP, do not currently reflect the reality of a failing economy and ever increasing debt burden.

bigadaj

EdGasketTheSecond said:

Linton said:

EdGasketTheSecond said:

The markets aren't factoring anything in at the moment; they are simply in a bubble created by QE and stimulus. Real returns on bonds are negative so the excess currency finds its way into the stockmarket which is in complete disconnect with reality.

There is no "disconnect with reality", QE and stimulus is part of the reality. 

But the 'disconnect' is when QE and stimulus are the only things driving the market. I'd say zombie companies kept afloat and PE's of over 1000, and PE's and market cap compared to GDP, do not currently reflect the reality of a failing economy and ever increasing debt burden.

Yes but that is offset by money printing, so rather than these assets increasing hugely in value it can be argued that the value of the currency is reducing instead,

MaxiRobriguez

EdGasketTheSecond said:

Linton said:

EdGasketTheSecond said:

The markets aren't factoring anything in at the moment; they are simply in a bubble created by QE and stimulus. Real returns on bonds are negative so the excess currency finds its way into the stockmarket which is in complete disconnect with reality.

There is no "disconnect with reality", QE and stimulus is part of the reality. 

But the 'disconnect' is when QE and stimulus are the only things driving the market. I'd say zombie companies kept afloat and PE's of over 1000, and PE's and market cap compared to GDP, do not currently reflect the reality of a failing economy and ever increasing debt burden.

Perhaps not but stimulus has been our reality for a decade and central banks are unlikely to change course now. Any 'second wave' is likely to be met with even more money thrown at the global economy.