Um, it's not? Assuming we're talking about the S&P 500, rather than global stock markets, it's still way off its peak, and closer to the trough than the peak. And it was down on the day yesterday.

More generally, the point about stock markets is that they are (in theory) forward looking. All the bad news like the unemployment figures is already priced in. So what the current state reflects is market participants' expectations about the future, which are much more positive now that we're seeing signs of infections/deaths peaking than they were when the curves were still exponential, government relief hadn't been implemented and there was almost no bottom to how bad things could get. If new developments happen that indicate we the peaking is illusory or that the economic deterioration is even worse than expected, then the stock market will fall.

I am Also baffled. Bailout funds partly maybe.
But there's going to be a considerable volume of lost wages through 2021.
Fewer recreational boats and nice clothes are going to get sold for instance.

1: Forward looking to 2025?

22 million unemployment claims in one month are already figured in?

Aside from the condescension of the opening clause, 1 reads like, "They're exuberant gamblers who are untethered from reality and just can't resist parking their money somewhere because it was burning a hole in their pocket for those two scary weeks in March."

I'm presuming it's a classic bull trap. But I know almost nothing about this stuff.

Yes (to 4). Once they're announced, they're factored in, pretty much by definition. And even at that very point in time, what matters (to the market reaction) isn't the absolute number, but how the number compares to expectations. I didn't look closely at forecasts around the time of the 22m release, but certainly before that first record breaking week I'd seen analysts forecasting even higher numbers than actually happened. The fundamental point is that, even in a weak version of the efficient markets hypothesis, it's not the absolute numbers that matter, it's how they compare to the expectations of market participants.

Also yes to 3, in theory. A share is (simplifying enormously) a claim on the future earnings of a company. If the discount rate is low, for example because interest rates are very low, then the present value of those cashflows is largely going to be dominated by those that occur years into the future.

6 seems way more likely.

I mean, maybe 1 and 6 are consistent with each other. GY never claimed they weren't all about to get hosed.

I didn't mean to be condescending, I just can't look at a chart of the S&P 500, or almost any global stock market, over the last couple of months and describe that as "doing so well". They've recovered a part of their historically enormous losses, but you're still looking at one of the biggest single-quarter drops of all time.

"They're exuberant gamblers who are untethered from reality and just can't resist parking their money somewhere because it was burning a hole in their pocket for those two scary weeks in March."

Or just that in March they expected, or at least feared, that things could get much worse than they turned out to have so far, even if things are really bad. There was also a massive liquidity crunch feeding into it at the time, which has largely been eased.

But who the hell is expecting anything other than a serious recession?

How could it be so untethered to reality?
No-one knows for sure what reality looks like. There may be a protracted depression or a short one. Either way big US corporations will mostly survive; they've been well taken care of in the bailouts to date, AIUI they came out of 2008 with profits generally up. The alternative is liquidating and holding cash when the Fed rate is literally zero.

I just can't look at a chart of the S&P 500, or almost any global stock market, over the last couple of months and describe that as "doing so well"

Eyeballing it, it looks like the S&P 500 is back up to June 2019 levels, from a trough of June 2017 levels. So it regained two years worth of growth in two weeks, during a catastrophic pandemic. That's not doing so well?

But who the hell is expecting anything other than a serious recession?

(Almost) Nobody, which is why the market is still 17% down from its peak.

Eyeballing it, it looks like the S&P 500 is back up to June 2019 levels, from a trough of June 2017 levels. So it regained two years worth of growth in two weeks, during a catastrophic pandemic. That's not doing so well?

Not really. Unless you were extraordinarily fortunate in your market timing, you're still looking at massive losses in your portfolio. The nature of extremely sharp declines like the ones we saw in March is that they engender extremely sharp rises, which may or may not be short term. That's just how uncertainty and fear plays out in financial markets. Even while the market was plummeting to its trough, there were days when it was up over 5%. When people are assuming the worst, anything that indicates the worst is not going to happen is a buy signal.

CAPE is still well above its average. regardless of whether the stimulus goes to JP Morgan or to hairdressers, the effect on the budget has to show up in interest rates eventually. Expecting zero interest forever seems unrealistic to me, that expectation would be the basis for a sustained high CAPE.
SPX is at its 2018 level, these months' bad news magnitude exceeds two years' growth.

CAPE is still well above its average. regardless of whether the stimulus goes to JP Morgan or to hairdressers, the effect on the budget has to show up in interest rates eventually. Expecting zero interest forever seems unrealistic to me, that expectation would be the basis for a sustained high CAPE.
SPX is at its 2018 level, these months' bad news magnitude exceeds two years' growth.

CAPE is still well above its average. regardless of whether the stimulus goes to JP Morgan or to hairdressers, the effect on the budget has to show up in interest rates eventually. Expecting zero interest forever seems unrealistic to me, that expectation would be the basis for a sustained high CAPE.
SPX is at its 2018 level, these months' bad news magnitude exceeds two years' growth.

lw

lw

You killed the sidebar, man.

Stonks!

Ginger's right. The market is down a massive amount from its recent highs, and small movements up and down are to be expected until there's some kind of recovery. But it's also important to keep in mind that you're not entirely wrong in 5. The stock market isn't the economy. They're related, and they affect each other, but they're not the same thing, which is why having a President who thinks the stock market tells him how healthy the economy is is pretty bad.

17: If I'm understanding CAPE correctly, you say the market is still overvalued?
Assuming it is overvalued, are stocks still worse to hold than cash? My dim understanding is most of the developed world has had close-to-zero interest most of the time since 2008, Japan for longer. And this shock is worse than 2008.

I am guessing it went down a lot when they were worried about the Chinese supply chain drying up, but now they are not worried about that anymore.

Also if one company can reliably make its stock go up by laying off people, logically the entire economy laying off 5 million people a week should be great for the economy.

Smart people think that the answer to 4 is "yes," and that even the answer to 3 is more-or-less "yes." One scoffs at efficient markets at one's peril.

So I'm not a market timer, but boy howdy, if I were, my 401k would be in cash. I'm just not seeing what the market sees here.

I largely agree with Ginger, but it is kind of amazing how much comparatively worse the Great Recession was on the stock market.

So presumably there are still some possible good futures that the market is taking into account that haven't been sufficiently ruled out, as improbable as they seem to us. Animal spirits, or is it reasonable?

And this shock is worse than 2008.

Depends on your definition of "worse." I mean, sure a lot of people are going to die, and many, many poor and middle class folks are going to be in huge trouble, but the response by the Fed has been excellent, and the response by Congress has been much, much better than 2008. I'm not sure how much the stock market cares about poor people, as long as the survivors start consuming again reasonably quickly, which is kind of built in to the situation. So it's not ridiculous to expect a v-shaped recovery. My main worry is: Recovery from what bottom? I'm not persuaded that we're terribly close to the bottom, and it seems to me like a very strong recovery could bring the stock market in the next couple of years to ... about where we are now.

The thing about 2008 is the financial system became unreliable. You can't do commerce if people don't trust financial institutions. There doesn't seem to be much worry about the financial system this time. I guess the smart folks think that the Fed and Congress have taken the necessary steps.

The financial/economic response of the Trump administration is the only aspect of coronavirus response they didn't totally fuck up. Both the fed and the white house/treasury wisely abandoned Republican principles and did most of what President Warren would have done, with more corruption but not enough to hurt the overall plan. Also some stock market optimization because Trump is an old man who believes that the stock market is the economy.

Also, the overall picture is less dire than it was a month ago, with all of the models predicting fewer deaths than they did back in March. The big unknowns were whether the US would try to shut everything down, and whether it would work. The market turned around a week after most states officially shut down.
.

27: I think a short depression remains possible, though not likely. Shutdowns seem to be working in most functional states (including the US seaboards? I'm not following closely enough). The Fed has again pulled all kinds of magic tricks to prevent financial implosion; more and hopefully more progressive US stimulus eventually will arrive; developed Asia has virus and economies largely in hand; the eurozone seems by painfully slow increments to be getting its shit together; the prospects for Democratic presidency and Congress by January I presume are improving. I think the single biggest things that need doing, and least likely to happen in time, are a general bailout for middle-income countries (as in, multiple trillions; IMF doesn't have remotely enough at this point) and sufficiently competent governance (either side of the border) to stop AMLO's shit from blowing back into the US. There's also the risk that this is the thing that finally pops the great PRC debt bubble, in which case...
(Partly pwned on preview.)

Re: this being worse than 2008, while I definitely think that's a possibility myself, particularly if Europe doesn't get its shit together politically, I don't think that's the market consensus. Pretty much every research piece I read has a base case involving a very steep fall in GDP (double digits annualised, sometimes as high as 20% to 30%) in most affected countries in Q2, followed by a fairly sharp recovery in the second half, resulting in a single digit fall in GDP for the full year and modest growth in 2021. That would be bad, but for many countries nowhere near as bad as 2008-2011. Greek GDP nearly halved in the previous crisis. So did that of many Eastern European countries. Spanish unemployment went over 20% and stayed there for years. Youth unemployment was over 50%.

Now, most analyses have a considerably more bearish worst case scenario, and I don't personally think those worst cases are severe enough, but the consensus is definitely forecasting a relatively modest impact on full year GDP.

Again, this isn't about the stock market being right, or even rational. It's about what people's current expectations are versus what they were before.

Thanks, unimaginative and Mossy. That all mostly makes sense. Shutdowns are mostly working, but I think parts of the US are going to get nasty second waves. Georgia is already planning on restoring many consumer facing business this week, and following it up with restaurants next week. Is insane too strong a word for that?

stop AMLO's shit from blowing back into the US

I need a talk-to-me-like-i'm-stupid explainer here, because I'm more ignorant about Mexico than I am even about most things, yet everything I hear about the situation there is bewildering.

pops the great PRC debt bubble

Eep.

Like 28.1, I doubt we are close to the bottom. I'm thinking there will be another crash when states have to shut everything down again for the second wave, or when Biden is elected (either because Republicans will not support spending once Trump is out of office, or because a unified Democratic government might undo the Trump tax act.)

It seems like a lot of states haven't even crested their first wave yet. This virus has a lot of gas left in the tank.

Gas is cheap.

Speaking of the economy and gas tanks, we haven't bought a tank of gas in like six weeks.

I too know essentially nothing about Mexico. Last I saw AMLO was strenuously preventing effective infection control. If that that doesn't stop Mexico might be closed when the US is ready to reopen.

I haven't been inside a vehicle of any kind for 45 days and counting. Probably going to be a lifetime record for me.

38: Huh, hadn't thought about that, but yeah. Last vehicle I used was my bike the weekend before the lockdown, so mid-March, and the last I was in would have been the train on my way back from Italy at the very start of March.

That was not a good time to go to Italy.

39 - hadn't thought of that either. Last trip in a vehicle (not counting bike) for me was 15 March. Probably is a lifetime record; even when I was a kid and we didn't have a car, there wouldn't have been a month when we didn't use a vehicle of some sort to get out of town.

I still drive to the store or the pharmacy. It's just not very far. The gas station by my house got robbed last night. It had been happening occasionally for quite a while. It's really close to highways and there's basically nobody around that block after midnight. It's a pretty solid business plan to rob that place unless they get a guard.

I was on a London bus last...yes, 15th March, the day voluntarily not going to the pub was announced, and in my experience the transition to abnormality.

I got an email that the maintenance people are going to be working on the AC in my building at work next week, and I need to come in and tarp up my office and remove anything that I don't want dust on.

I have no idea what to make of this! It seems insane to require me to tarp up my own office. This can't possibly be SOP?! But I haven't pressed back and argued because I don't know if there are extenuating pandemic circumstances that I should be understanding of.

Specifically, they're going to be working above my office. Only two of us are affected.

That sounds suboptimal. When I mentioned that when we got back to work, there's no way I'm going to be the first one to open the refrigerator, someone called and made maintenance go throw away everything.

Whoops, I thought I'd written this in the Check-in thread.

i think mossy at 30 provides a v good summary, also agree the fed gov'ts economic-financial system response has been surprisingly competent given the political context.

the situation in mexico is alarming, not just bc of the immediate health and economic issues but also bc it seems that the paramilitary-narco parallel "state" is profiting from the moment to extend control. this will further fuel support for more and more and more repressive measures on the us-mexico border. the misery created on both sides of the border is really being undervalued imo. on this side of the border - the effects on the ag-food systems are going to be absolutely fucking massive, and will extend to construction and hospitality once those sectors are in position to get back to something like half of pre-pandemic levels of operation. i've never been wrong yet estimating the degree to which most us-ians are utterly clueless how intertwined our economy is with labor from mexico (and to a lesser extent central america).

Mexico has about 1% the confirmed cases of the US with about 3/8 of the population.

I wonder, also, if the testing push means high-income countries are crowding out access to tests for middle-income ones, given bottlenecks in supply chains like those Italian swabs.

Treating migrants like shit has downsides. Who knew?

I bet the Italian swabs are much better from an aesthetic perspective than the Chinese ones.

48 reminds me, a bunch of people are going to get killed by by CBP detention policy. Podcast.

re: 38, 39, 41, 43

Last time I was in a vehicle was ... today.

We have one, arguably, two, smallish supermarkets of the "metro" variety within walking distance of our house. Both have pretty big queues, and the last time I was in either, almost none of the food we'd eat. All home delivery of food ... literally impossible. I assume the neighbours who are still getting deliveries have some kind of fiddle/scam going on,* or some kind of recurring slot that they had pre-crisis.

So I've been using a mix of local halal place and local corner shop -- both walking distance -- and then driving to a proper greengrocer/butcher, about once a week, to get fresh food.** It's not far, about 3 miles, but I'd not want to walk it carrying a week's worth of food for 3 people. That one six mile round trip, once a week, is the only time I've been in a vehicle since about the 20th of March.

* I'd bet pretty highly some sort of fiddle/scam, although I'm not sure precisely what that might be.
** we don't have a big freezer or fridge, so about the most fresh food we can keep in the flat is about a week's worth.

To answer the question in the OP, it's based on 2 factors
1. a lot of traders are dime store sociopaths (really, I studied and worked with many of these creeps) so "it's all good, man"
but more because
2. we need to think of the stock market as
-- less of a means for the efficient reallocation of capital or expression of present value versus more as a just another collection of products that someone is trying to sell us
-- and similarly, to think of the daily variation in prices of individual stocks as less due to the arrival of new information (I mean, really, new info daily on thousands of stocks?) versus more as an analog to stores having daily & weekly sales and specials in order to get you to buy now while it's cheap
-- and finally to think of owning a stock as less an investment in ownership and future financial security (er, real estate? other assets) versus more as equivalent to the difference between attending a ball game in person versus watching it on TV.

What does that last bullet point mean?

That was not a good time to go to Italy.

In retrospect, no, though it worked out quite well in the end (thank God, as I was with my elderly father). Thanks to a company policy implemented while I was abroad, I've been self isolating since long before the lockdown, so my chances of catching it were probably less than if I hadn't gone.

I thought it was just that Amazon is now 70% of the stock market all by itself and whatever's good for Amazon is therefore good for all of us.

53: We haven't been able to do grocery ordering in a while--my wife said that apparently she has maxed out her lifetime allowance of ravioli purchases on Amazon Fresh. Nor have I been in any of the metro stores for a bit. Londis still well stocked. We've started getting fresh grocery delivery from local medium/small businesses--an Italian place for fresh pasta, a doughnut place(??) that has started shipping fresh produce, a bakery--and we've had a lot of luck with it. Usually they have a lot of slots.

And my intent wasn't to shame anyone who's still driving for any reason, it just feels so bizarre to not be moving in any way beyond foot power. I've gone months without driving or being in a car before, but I'd always be taking public transit.

bottlenecks in supply chains like those Italian swabs.

Racist.

I think the price of stonks is primarily an indicator of the overclass's confidence that they will be able to continue soaking the proletariat without having to share teh goodies. With the covid-19 out there, things were dicey for a while, but all in all it seems as the rich have recovered their confidence that they will continue to be able to screw the poor.

The real treasure is the real treasure we expropriate along the way.

Stupid phone.

The real treasure is the blood you spill, so please be sure to recover as much as possible.

Further to 59, plenty of industries will still make money: "Health insurers are likely to remain profitable despite the uncertainty around COVID-19, according to a new analysis."

The analysts said that even in the most severe scenario modeled, where 40% of Americans are infected by the virus, companies would likely break even on EBITDA and have notable capital and liquidity.

55 You're still a spectator not a player, being close to the action does not make you part of the game

You can still lose your teeth to a hockey puck if you're in the stands.

Why they were using a hockey puck at a ball game, we may never know.

You can't count on Canadians.

The real treasure is the oil under the South China Sea.

I'm not a market timer, but boy howdy, if I were, my 401k would be in cash. I'm just not seeing what the market sees here.

I can't pull the trigger on reinvesting for a couple of reasons: one, I think I'm locked out of my account for unclear technical reasons that I have less than zero enthusiasm for fixing; and two, I have now developed a huge moral allergy to potentially profiting off human misery, which may be some kind of purity complex about how Trump keeps wiping his face with his hand and then touching the stock market. I don't think it's at all rational, but maybe it's understandable. I should probably figure out the access problem.

My employer did delay the lump-sum 401k match deposit by 6 weeks, so the stock market wouldn't just eat it up around Leap Day. That was sporting of them.

a bunch of people are going to get killed by by CBP detention policy.

I almost responded "motherfucker, everyone here knows this without listening to a podcast," but then I started to wonder if I was perhaps tense for unrelated reasons. Or loosely related reasons. I'M TENSE. (I have also had no coffee today and the cognitive decline is causing, like, second- or third-order stupefaction.)

Fidget spinner go brrrr

I remember thinking at some point "Keeping my money in the stock market is a good happiness hedge against Trump staying president. If I lose a bunch of money there's no way he's going to be reelected, and I'd happily spend a few thousand dollars for that outcome."

The wheels on the fingers go brrr, brrr, brrr.

I have studiously avoided checking my 401(k) since this started.

I have studiously avoided checking my 401(k) since this started.

Wise. I did, just for a lark, and it was even lower than my guesstimate. Still, I'm not too freaked out because I've got 10 years before I need to touch it, knock a whole lotta wood.

I'm okay looking at my 401k because I have a monthly tracker I've been maintaining for over four years, so I can see at a glance how much value it's gained over time.

OT: Vampire Weekend sounds like Paul Simon, but I blame them more because they've got 40 more years of music to find a better influence from.

My boss signed up for NextDoor, so now I can't do things like respond to "Can anybody make recommendations for a fence installer?" with "I think you should probably start with the posts."

I'm sorry lurid! I just thought with things being so crazy some of you might have run low on hate. Just trying to help.

50: As a Narnian, I'm sad that people are dying but Narnians were overdue a warning that treating a segment of the population as non-human has consequences even for the elite.

I have to call my retirement plan and find out why the change I made to contribute less still hasn't been put through. A change previously took one paycheck to go through; it's now been more than a month.