Why has the s&p500 already made a full recovery?

[jackg]

I was just looking at the comparisons of the charts between the dax, uk ftse and s&p500 and it looks like the S&P has has majorly outperformed the others but I'm trying to work out why?

A lot of people seem to think consumers are buying more from larger companies and less from smaller ones and the US government seemed to be doing it's best to bailout everything other countries were competing on (afaik) against it - like they normally do. But it seems weird that part of the market has already fully recovered even though the pandemic is set to continue for quite a while. Did people just deposit their cheques from the government straight into the stock market? Are companies doing buybacks still with their own rescue packages? Or do people wait for a crash before they start investing...

[The Sceptical Chymist]

The US stock market (in my own opinion) is extremely overvalued, and yes I do think that a not insignificant proportion of US residents deposited their stimulus checks right into their brokerage accounts and used the money to speculate/invest/whatever you want to call it.  If you look on Youtube, there are all sorts of videos about Robinhood customers and all the profits they've recently made.  It isn't likely they bought stocks that are components of the DAX or the FTSE, but they might very well have bought stocks in the S&P 500.

I watch the stock market constantly even though I don't have a lot of skin in the game, and I'd say a day of reckoning is coming for the US indexes.  Why?  Because the prices of the stocks in them have been being inflated for over a decade by low interest rates, rampant money printing, and now stimulus checks.  I'm not sure what the P/E average is for the S&P 500, but I'd imagine it's really high.

Anyway, stock prices right now are not reflecting the health of the economy IMO.  Everything is in bizarro land, and that's why gold and silver and bitcoin are looking attractive to investors at the moment.

[jackg]

I watch the stock market constantly even though I don't have a lot of skin in the game, and I'd say a day of reckoning is coming for the US indexes.  Why?  Because the prices of the stocks in them have been being inflated for over a decade by low interest rates, rampant money printing, and now stimulus checks.  I'm not sure what the P/E average is for the S&P 500, but I'd imagine it's really high.

The pe average of the s&p500 published by vanguard was 26 before the crash - I assume its probably still around there.

The UK ftse 100 is at a 16 pe ratio for comparison and I think high cap Europe remains around 15 (at least in the west).

A lot of this is looking like a last ditch attempt for the US to stay on top, I don't think the money printing is going to stop for a while - it might be unnecessary but the US economy already looks like it has a very high amount of money flowing through it compared with other country (due to healthcare premiums and the tax system to name a few).

[Bl_385]

The US stock market (in my own opinion) is extremely overvalued, and yes I do think that a not insignificant proportion of US residents deposited their stimulus checks right into their brokerage accounts and used the money to speculate/invest/whatever you want to call it.  If you look on Youtube, there are all sorts of videos about Robinhood customers and all the profits they've recently made.  It isn't likely they bought stocks that are components of the DAX or the FTSE, but they might very well have bought stocks in the S&P 500.

I watch the stock market constantly even though I don't have a lot of skin in the game, and I'd say a day of reckoning is coming for the US indexes.  Why?  Because the prices of the stocks in them have been being inflated for over a decade by low interest rates, rampant money printing, and now stimulus checks.  I'm not sure what the P/E average is for the S&P 500, but I'd imagine it's really high.

Anyway, stock prices right now are not reflecting the health of the economy IMO.  Everything is in bizarro land, and that's why gold and silver and bitcoin are looking attractive to investors at the moment.

It is overestimated, but the fact is that the traditional market does not necessarily follow and be connected to the current economic situation in the world and often and almost always goes the opposite of what most expect.

[suchmoon]

The bubble is quite spectacular. I'm not sure if the investors/speculators/kids-with-robinhood-accounts believe that the pandemic will be defeated promptly, or that the economy will quickly shift from in-person services to online, but I'd give it until around election time. If it doesn't crash by then I will give up and join the pumper cult and buy $10k worth of Tesla stock (if one share still costs less than $10k at that time).

[jackg]

It is overestimated, but the fact is that the traditional market does not necessarily follow and be connected to the current economic situation in the world and often and almost always goes the opposite of what most expect.

A stronger economy not recovering it's market faster is a bit of a weird one for me though. On the way down it was claiimed the market cap lost $6 trillion, these funds have come from somewhere and haven't gone back into more successful areas? (although perhaps picking germany was a mistake since it's in schengen).

The bubble is quite spectacular. I'm not sure if the investors/speculators/kids-with-robinhood-accounts believe that the pandemic will be defeated promptly, or that the economy will quickly shift from in-person services to online, but I'd give it until around election time. If it doesn't crash by then I will give up and join the pumper cult and buy $10k worth of Tesla stock (if one share still costs less than $10k at that time).

I'd invest in the new mind control startup he was thinking of, that way you're buying your share of ~100 million gullible idiots too (if you've ever read/watched divergent).
I'm not sure I like Musk, he's probably contributing a lot to global emmissions these days too with all the test rockets and he gets far more credit and influence than he deserves for losing his box to think in.

[crwth]

Understanding that the S&P 500 is the best representative for the U.S. Stock market, it seems that they got back with more money in the market. There are a lot of companies reaching ATH as well since the market seems bullish. There is massive support based on the daily chart on it



Basing on the chart, it seems that if it breaks the 3400 mark, it will continue up to 3600, and a lot more people would want to invest in the market. I think the mindset of people now is that it's recovering already and it's time to put some money back again. It seems FOMO to me. There are probably a lot of people coming in to the market today.

[exstasie]

I was just looking at the comparisons of the charts between the dax, uk ftse and s&p500 and it looks like the S&P has has majorly outperformed the others but I'm trying to work out why?

The Fed injected a lot more capital into the markets than any other central bank, something like $3 trillion+. More importantly, they basically said to the market "we have infinite dollars to pump into the market, do not fuck with us."

Investors are a lot more concerned about Fed policy than actual company fundamentals or profitability. It's an asset bubble, and it looks like it'll keep inflating for a while. It's not just stocks either. It's basically all hard assets and risk assets.

I'm annoyed because it certainly reverses some of my real estate plans, but hey, all you can do is position yourself on the right side of the market. Buy the dips, risk assets are headed to the moon.

[suchmoon]

I'd invest in the new mind control startup he was thinking of, that way you're buying your share of ~100 million gullible idiots too (if you've ever read/watched divergent).
I'm not sure I like Musk, he's probably contributing a lot to global emmissions these days too with all the test rockets and he gets far more credit and influence than he deserves for losing his box to think in.

I think he's high on weed most of the time. I'm a sucker for spaceships but unfortunately SpaceX is not publicly-traded so I can't put all my retirement savings into it LOL.

As for Tesla, NFI how it gets valued more than the rest of the US automotive industry combined. The cheapest car they sell is like 50 grand - how are they finding so many hippies to buy it? I though all those people would have gone broke buying new iPhones every year. Disclaimer: I drive a car worth about three iPhones.

BTW Tesla P/E is > 1000, which must be some kind of record.

[The Sceptical Chymist]

Investors are a lot more concerned about Fed policy than actual company fundamentals or profitability. It's an asset bubble, and it looks like it'll keep inflating for a while. It's not just stocks either. It's basically all hard assets and risk assets.

Yep, that's the way I see it as well.  When you see a bunch of different asset classes rising all at once, you know there's an impending problem--and by problem, I mean a bubble that's going to pop.

I'm annoyed because it certainly reverses some of my real estate plans, but hey, all you can do is position yourself on the right side of the market. Buy the dips, risk assets are headed to the moon.

I'd be interested to know what you mean by the scuttling of your real estate plans, but I'd understand completely if you didn't want to share that info publicly.  As for buying those "risk assets" on the dips, that's good advice for short-term traders, but not for long-term holders such as myself.  I probably ought to be selling everything for cash right now, but I just can't bring myself to do it.

BTW Tesla P/E is > 1000, which must be some kind of record.

Nah, companies with no earnings have P/E multiples of infinity, and though it's been a long time since I cracked open a math textbook I think infinity>1000.  Then again, you can't divide by zero...but that's nitpicking just a tad.

[davis196]

I was just looking at the comparisons of the charts between the dax, uk ftse and s&p500 and it looks like the S&P has has majorly outperformed the others but I'm trying to work out why?

A lot of people seem to think consumers are buying more from larger companies and less from smaller ones and the US government seemed to be doing it's best to bailout everything other countries were competing on (afaik) against it - like they normally do. But it seems weird that part of the market has already fully recovered even though the pandemic is set to continue for quite a while. Did people just deposit their cheques from the government straight into the stock market? Are companies doing buybacks still with their own rescue packages? Or do people wait for a crash before they start investing...

Why?Because FED money printer go brrrrr....
The same thing kinda happened back in 2009-2012.The big corporations and banks recovered pretty fast from the financial crisis,with the support of the Federal government and the Federal Reserve.The small business was damaged severely so it took several years for the unemployment rates to decrease.
This crisis is the same-small businesses are destroyed,unemployment going up,but the giant corporations are stronger than ever.

[suchmoon]

Nah, companies with no earnings have P/E multiples of infinity, and though it's been a long time since I cracked open a math textbook I think infinity>1000.  Then again, you can't divide by zero...but that's nitpicking just a tad.

Fair enough, but some third-grade math shows that with a market cap of $400 billion Tesla needs to make $20 billion to have a somewhat-more-reasonable-but-still-insane-for-an-auto-manufacturer P/E of 20-ish. Which if I'm not mistaken is like 15-20% of worldwide auto industry profits.

Toyota is the largest auto manufacturer in the world with a ~10% market share, market cap of ~$200 billion, and P/E between 10-15 on a good day.

Maybe I need some of Musk's weed for this to make sense.

[Coyster]

And in this mornings news of few minutes ago, the stock market in Europe as a whole is looking good and recovering well, with FTSE, DAX, CAC 40 and the rest all starting the week on a higher note; here's an excerpt:

London’s FTSE is seen opening 31 points higher at 6,025, Germany’s DAX is seen 67 points higher at 12,820, France’s CAC 40 is expected to open 26 points higher at 4,914 and Italy’s FTSE MIB up 87 points at 19,753, according to IG.

The pandemic doesn't seem to be stopping the U.S. stock, still an upward movement after last weeks record from S&P 500.

Meanwhile, U.S. stock futures climbed slightly higher in overnight trading on Sunday as Wall Street tries to build on a record-setting week. Last week, a rally in major technology shares pushed the S&P 500 to levels above its previous record set before the pandemic.

Source of the info: https://www.cnbc.com/2020/08/24/european-markets-watch-coronavirus-and-geopolitics.html

[Poker Player]

I keep hearing that the S&P 500 is going to explode again like since 2012 or so.

I also think that at the moment it is overrated, but I find it curious that in a bitcoin forum they talk so clearly about the S&P bubble.

Were there many people in this forum saying that there was a bubble in the bitcoin in December 2017 and that the price did not correspond with its fundamentals?

Many modern bubbles have to do with the massive printing of fiat money. Much of that money ends up in assets such as the stock market, bitcoin or the real estate market

As for certain stocks, like Tesla, the current P/E ratio or other fundamentals don't justify their price but people buy them because they make projections about the future. They think they are going to make much higher profits, etc.

Similarly, in December 2017 there were people who thought that bitcoin could continue to rise because of future projections.

I think the S&P has recovered simply because the future doesn't look as dark as it did in March.

[wxa7115]

I was just looking at the comparisons of the charts between the dax, uk ftse and s&p500 and it looks like the S&P has has majorly outperformed the others but I'm trying to work out why?

A lot of people seem to think consumers are buying more from larger companies and less from smaller ones and the US government seemed to be doing it's best to bailout everything other countries were competing on (afaik) against it - like they normally do. But it seems weird that part of the market has already fully recovered even though the pandemic is set to continue for quite a while. Did people just deposit their cheques from the government straight into the stock market? Are companies doing buybacks still with their own rescue packages? Or do people wait for a crash before they start investing...

At the beginning it may seem difficult to understand why but once you begin to think about it it's very logical, the real economy the one that depends on setting up a physical store and selling actual stuff that people need is in shambles, so there is a lot of money on the sidelines waiting an opportunity to make profits and they are turning their heads to the stock market, after the huge crash that we saw many people thought that was the perfect opportunity to take advantage of the low prices of stocks and they began to buy.

This is what has caused the impressive recovery we saw in the stock market and when you add all the free money that the government printed this made the recover even faster, in my opinion this was their intention all along however there is such a divorce between the real economy and the stock market that at some point it will have to be corrected and when that happens the stock market will crash for good.

[exstasie]

I'm annoyed because it certainly reverses some of my real estate plans, but hey, all you can do is position yourself on the right side of the market. Buy the dips, risk assets are headed to the moon.

I'd be interested to know what you mean by the scuttling of your real estate plans, but I'd understand completely if you didn't want to share that info publicly.

I was initially expecting more blood in the real estate market, another harsh leg down to lower lows, sometime this year. On the REIT charts it would look something like 2008-2009. I'm sitting on a lot of cash and ready to pull the trigger if the market were to dip where I'm hoping, but I'm just not too confident in that scenario anymore. The residential market has remained somewhat robust, at least the markets I'm interested in (houses or townhouse style condos in second tier cities or inner suburbs). Now I'm leaning towards rolling that cash back into more liquid investments and putting real estate on the back burner, at least as far as home buying goes. On the business side (commercial warehousing and office space) I'm more confident I can scoop up good value over the next year or two. Residential.....I just don't know.

As for buying those "risk assets" on the dips, that's good advice for short-term traders, but not for long-term holders such as myself.  I probably ought to be selling everything for cash right now, but I just can't bring myself to do it.

With stocks and gold at ATHs, and BTC breaking yearly technical resistance.....why?

I could understand selling in March-May when it looked more like a bull trap. Now it looks like a bull market.

[Poker Player]

As for buying those "risk assets" on the dips, that's good advice for short-term traders, but not for long-term holders such as myself.  I probably ought to be selling everything for cash right now, but I just can't bring myself to do it.

With stocks and gold at ATHs, and BTC breaking yearly technical resistance.....why?

I could understand selling in March-May when it looked more like a bull trap. Now it looks like a bull market.

I get The Pharmacist's idea. It's just sell high, buy low. March-May was a good time to buy. Now it's time to sell. As stocks have broken ATHs, they may keep going up for a while, but you never know when the trend is going to reverse.

If you sell now, you make a profit, if you sold in April, you probably made a loss.

Anyway, if the money you invest it's money you don't need (as it should be) I think it is better to just keep buying regularly, dollar-cost averaging, than trying to time the market.

[exstasie]

As for buying those "risk assets" on the dips, that's good advice for short-term traders, but not for long-term holders such as myself.  I probably ought to be selling everything for cash right now, but I just can't bring myself to do it.

With stocks and gold at ATHs, and BTC breaking yearly technical resistance.....why?

I could understand selling in March-May when it looked more like a bull trap. Now it looks like a bull market.

I get The Pharmacist's idea. It's just sell high, buy low. March-May was a good time to buy.

Sure, but you can only say that with the benefit of hindsight. At the time, April could easily have been a bull trap, and if not for the Fed it likely would have been. By the same token, you can't really say this is a good time to sell. Sure, we could drop to the $8,000s or $9,000s. We could also run to $15K. All I see on the weekly chart is indecision, so for me it's not necessarily a good time to sell. There is still good risk/reward on holding until an obvious breakdown occurs. For example, a breakdown of the current daily BB squeeze:



Slight bearish bias here, given the failure to break upwards last week, and that we're now holding in the lower half of the daily bands. Holding below the $11,370 low will constitute a significant breakdown. A stop loss below there would make a lot of sense, maybe with the caveat of waiting for a daily candle close.

Now it's time to sell. As stocks have broken ATHs, they may keep going up for a while, but you never know when the trend is going to reverse.

Anyway, if the money you invest it's money you don't need (as it should be) I think it is better to just keep buying regularly, dollar-cost averaging, than trying to time the market.

Well is it time to sell or should we not be trying to time the market?

DCA is a fine approach. The point I was trying to make was this: all technical signs point to a new bull market. For me, that means holding BTC, buying dips with available cash, and looking for margin long opportunities. I understand the "take profit" mindset, but it can be dangerously easy to lose coins that way when the bull market kicks off in earnest.

[Hydrogen]

I was just looking at the comparisons of the charts between the dax, uk ftse and s&p500 and it looks like the S&P has has majorly outperformed the others but I'm trying to work out why?

This news story below outlines the standard explanation.

....

The Fed caused 93% of the entire stock market's move since 2008

The bull market just celebrated its seventh anniversary. But the gains in recent years – as well as its recent sputter – may be explained by just one thing: monetary policy.

The factors behind that and previous bubbles can be illuminated using simple visual analysis of a chart.

The S&P 500 (^GSPC) doubled in value from November 2008 to October 2014, coinciding with the Federal Reserve Bank’s “quantitative easing” asset purchasing program. After three rounds of “QE,” where the Fed poured billions of dollars into the bond market monthly, the Fed’s balance sheet went from $2.1 trillion to $4.5 trillion.

This isn’t just a spurious correlation, according to economist Brian Barnier, principal at ValueBridge Advisors and founder of FedDashboard.com. What’s more, he says previous bull runs in the market lasting several years can also be explained by single factors each time.

Barnier first compiled data on the total value of publicly-traded U.S. stocks since 1950. He then divided it by another economic factor, graphing the ratio for each one. If the chart showed horizontal lines stretching over long periods of time, that meant both the numerator (stock values) and the denominator (the other factor) were moving at the same rate.

“That's the beauty of the visual analysis,” he said. “All we have to do is find straight, stable lines and we know we've got something good.”

Scouring hundreds of different factors, Barnier ultimately whittled it down to just four factors: GDP data five years into the future, household and nonprofit liabilities, open market paper, and the Fed’s assets. At different stretches of time, just one of those was the single biggest driver of the market and was confirmed with regression analyses.

He isolated each factor in a separate chart, calling them “eras” for the stock market.

From after World War II until the mid-1970s, future GDP outlook explained 90% of the stock market’s move, according to statistical analysis by Barnier.

GDP growth lost its sway on the market in the early 1970s with the rise of credit cards and consumer debt. Household liabilities grew with plastic first, followed by home mortgages, until the real estate crash of the early 1990s. Barnier’s analysis shows debt explained 95% of the entire market’s move during this time.

The period between the mid- to late-1990s until 2000 was, of course, marked by the tech bubble. While stocks took much of the headline, that time also saw heightened activity in the commercial paper market. Startups and young companies sought cash beyond their stratospheric share values to fund their operations. Barnier’s regression analysis shows commercial paper increases could explain as much as 97% of the tech bubble.

Shortly after the tech bubble burst, a housing bubble began, once more in the form of mortgages and other debt. That drove 94% of the market’s move for the first several years of the current century.

As the financial crisis reached a fevered pitch in 2008, the Federal Reserve took to flooding the financial market with dollars by buying up bonds. Simultaneously, interest rates fell dramatically, as bond yields move in the opposite direction of bond prices. Barnier sees the Fed as responsible for over 93% of the market from the start of QE until today. During the first half of 2013, the Fed caused the entire market’s growth, he said.
Since the Fed stopped buying bonds in late 2014, the S&P 500 has been batted around in a 16% range and is more or less where it was when the QE came to a close. Investors need to anticipate the next driver, said Barnier.

“Quantitative easing has stopped, but now we're into the interest rate world,” he said. “That means for any investor trying to figure out what to do, step one is starting with a macro strategy.”

https://finance.yahoo.com/news/the-fed-caused-93--of-the-entire-stock-market-s-move-since-2008--analysis-194426366.html

Many have remarked upon post corona stock market trends commenting upon how they make no sense. The above article presents a scenario with the potential to explain everything. Market trends over the last few decades fail to make sense if natural market mechanics are the prime moving impetus. If however the majority of trends are attributed to central banks injecting selective liquidity into markets. Suddenly it may all begin to make sense.

[BrewMaster]

when a movement in a market doesn't make any sense at all that always means there is manipulation going on. fake movements always look weird and make no sense.
granted the economy has recovered a little bit and the life resumed but things are far from being normal and certainly not fully recovered with all the money that all these companies in stock market lost in the past couple of months and continue to lose.
there is also another factor that could be the main reason for manipulation. and that is the coming US elections. a recovered stock market, even if fake and in a bubble, looks so much better in campaigns