Re:Why is the stock market rallying when the economy is so bad?
by paulpauper on Sunday May 10, 2020 @03:57PM
(#23135601)
It is really not a mystery why the market has done so well and will continue to do well. Corporate profits, especially in the tech sector, are at near record highs, much higher than during the 90s. Companies like Walmart are printing cash, and that money goes into buybacks, dividends ,or shareholder equity. Either way, shareholders benefit and this is magnified by very low inflation, so the real return is even higher than it was compared to the 80s and 90s. If huge, multinational companies generate 20-30% profits or cash flow, that is $ that will go to shareholders one way or another. Great time to be in the stock market. Added to positions in April at a discount.
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Re:Why is the stock market rallying when the economy is so bad?
by kgwgk on Sunday May 10, 2020 @04:45PM
(#23136005)
Corporate earnings have been flat for over a year, so they don't really explain why the S&P 500 still went up 15% from the 2018 highs. And now expectations are down substantially and even for 2021 are below 2018 levels.
Re:Why is the stock market rallying when the economy is so bad?
by paulpauper on Sunday May 10, 2020 @06:11PM
(#23136778)
if a $100 billion dollar company generates $10 billion of profit annually, then that is 10% returned to shareholders every year even if there is no earnings growth.
Re:Why is the stock market rallying when the economy is so bad?
by kgwgk on Sunday May 10, 2020 @06:42PM
(#23137006)
Sure, with no earnings growth and no price increase shareholders would be richer due to the cash returned via dividends.
But that doesn't explain why the price you pay for $X in earnings is higher in one case than in the other. (Retained earnings could explain a minimal part of the increase.)
There is no reason for that $100bn company to be a $110bn company next year if it has returned the $10bn it earned to shareholders and it's still going to earn $10bn.
Re:Why is the stock market rallying when the economy is so bad?
by mslot on Monday May 11, 2020 @03:27AM
(#23139684)
A reason could be that the yields on other forms of investment are going down. If buyers are willing to accept a 1% yield because they cannot easily get it anywhere else then the share price can go to $1 trillion, or even further if yield is expected to go up over time.