Q4 this year and Q1 next year just have to be bloodbaths this year - but then again, I'm literally always wrong about this stuff. It really seems like I should be right.

I say this because I think now that callbacks are starting slowly and lots of offices have said Sept - Oct time will when they 'open the office' again properly - the redundancies will be made before then - then belts tighten, budgets get slashed, spending goes way down due to layoffs - and then Q4 and following quarters will be abysmal.

I should probably buy calls on the S&P to be at record highs by year end instead though because we live in clown world now.

We live in weird times. I too am shocked and constantly shown wrong by the SP50 rising while many millions file unemployment.

I’ve read that part of the rise is from the Fed lower rates to 0. It essentially pushed banks to buy into the market for their only sources of interest.

I know from the past that company stock usually rises after they announce reorganization. Investors may be seeing opportunities for profit down the road from more optimized org charts following the mass unemployment.

I do believe Dr Fauci and other medical researchers comparing this to 1918. If past is precedent we will see a far worse outbreak and economic fallout in the fall and winter then we did this spring. If the valuation decrease were over pessimistic this time around then next time may be more muted. If the decrease prove to have been over optimistic then expect further devaluations next time. Both of those assuming rational actors and reactions, neither of which assured.

I also think we haven’t seen the full fallout from even the spring yet. I think we won’t know until the end of august how all of the unemployment affected rent and mortgage payments during the spring outbreak. We also don’t know whether the protests are going to spark super spreader events. That could necessitate closing the economy yet again and sooner. On the other side, we don’t have a monthly stimulus or cancelled obligations-those could have up or down impacts respectfully.

I see a lot of really grave uncertainty in the future right now. The pandemic is a very real thing. The protests are too. The political desires to stimulate the economy despite any other affects is perhaps greater still. So I think there’s lots of noise and uncertainty here-which makes for volatility in valuations.

Edit-I also just want to point out that the 1920s were marked by more than just Black Friday in October(date?). I’d suggest we all go back and refresh on how things played out back then to compare to today.

Not sure why this is surprising as most people who are out of work don't have any equity in the stock market. I think it's more a reflection of income inequality and the concentration of capital. There is a huge disconnect indeed.

Yeah, completely agree - I was thinking about this when this rally first started after the steep drops, at which time there was a narrative on the financial news that things were less bad because there were less outflows from retail investors than in previous downturns. One commentator was arguing that this is because the public had finally learned the errors of their ways in attempting to time the market.

While I suppose it's possible that there may be some effect like this, I'm a bit suspicious of the idea that the outlook and risk tolerance of the typical retail investor could change that significantly.

It definitely left me wondering to what extent capital invested in the equity markets has continued to move away from being held by those who are likeliest to be out of work right now.

>but then again, I'm literally always wrong about this stuff.

Feel that. Story of every smart person who thinks the market should act logically

Assuming there are a bunch of institutional trading bots using machine learning, they are gonna learn to fleece retail investors. With that in mind it kinda makes sense that the market would often behave opposite to expectations.

I think this is rich people telling you that retail (which is literally burning to the ground) doesn't matter. Poor people are burning down their own places of employment, but that's not going to be a big deal for the economy. Retail generally has tiny margins anyways and was slowly moving to be online. Now it's just moving faster. Bad for poor people who need jobs, good for stockholders and people who don't need low level retail jobs.

I'm assuming this news means a 20% gain is incoming. A zombie apocalypse would cause it to triple, because "just think of all that quantitative easing!"

Until Congress starts looking reluctant to pass trillion dollar appropriations quarterly and the Fed stops buying assets in quantity. So, yeah, I wouldn't bet against this rally, except to hedge existing gains.

Yes. As long as the government continues to pour money into the top end of the wealth curve, those people will continue to put it in the market. Under the circumstances, there is certainly no rush to invest it into their businesses in the form of new jobs, or infrastructure projects. And they can't bank it, the interest rates are too low.

Probably until the bankruptcies start rolling in.

I second this. I think once this starts happening en masse, we'll see a correction in the markets. I dont think we're too far off: https://www.npr.org/2020/06/03/867856602/millions-of-america...

And the second rising wave of infections this autumn cause an effective shut down (due to fear if not government action)...

The market is still down ~10% from it's pre-COVID high.

I think the point is that a worldwide pandemic, 40 million people unemployed, China annexing Hong Kong, and mass civil unrest should logically lead to far more of a downturn than merely 10% off all-time highs (which were already several standard deviations above long term price to earnings ratios).

Does it really though? Money doesn’t care about people. Why should that annexation be harmful for the market? Why do 40 million unemployed a dent? They’re not the ones spending money because this crisis hit bottom first.

This is what I am starting to suspect. From the Stock Market's perspective, the economic bottom 30% don't matter. They don't contribute much to the economy and whatever happens to them does not really matter to the Stock Market.

Pre-COVID, I would never have believed that.

Go back to the market activity during the Arab Spring. The market definitely does care about uncertainty RE trading partners and Hong Kong is a huge trading partner.

40 million unemployed domestically means lower demand for many businesses. Who will buy new cars (with debt), houses (with debt), consumer electronics, etc etc?

My most aggressive investment accounts reached new highs this week. There was money to be made going down (puts) and money to be made when things started bouncing back.

And that peak was probably also aspirational at best. The SP500 has basically become the stock price manipulation hall of fame.

Stocks are rebounding globally, not just in the US markets, though are still down over 6 months.

It's interesting because I'd expect a certain number of people to be cashing in their 401ks and IRAs, which surely would have _some_ effect on the stock market, but it seems that as well as the recent political situation have had zero effect.

A friend dipped into his 401k recently. The way it worked is that instead of taking money from the 401k directly, they issued him a loan for the amount he wanted with the 401k as collateral. They framed it as less tax liability for him but I'd wager the bigger reason was to prevent stock sell offs.

If that's happening at scale, then those 401k accounts are getting massive liabilities stacked up against them.. which falls apart if their value goes down.

401k backed loans are nothing new. The incentive is the avoidance of tax penalties (or less obtusely that's the disincentive at the federal level to just withdrawing). It's not to prevent stock sell-offs, it's to prevent people for whimsically withdrawing from their 401k/retirement account..

Nothing stops your friend from selling everything and leaving it as cash or some non-stock instrument in the account.

When you take out 401K loan, the plan sells equivalent amount of shares and gives you the cash. So it's still causing market sell off. As you pay it back the shares are bought again.

A mutual fund doesn't own specific shares of stocks on behalf of an individual - it's just one big pool of assets, and the individuals own shares of that pool, not the underlying securities.

So if there's still lots of cash coming in every month from new payroll deductions, there might be no need for the fund to sell stocks to pay out a loan. They'd just buy fewer stocks that month.

They'd only have to sell stocks if the total cash going out (loans, plus distributions to retirees) exceeded the total cash coming in (payroll deductions).

The fed's actions of the last few months have taken much of the risk out of the stock market. There's little perceived downside.

I'm not talking about people pulling out because it might be a bad investment. Many people dip into their retirement simply because they need cash.

Is this a reference to that old flash game?

https://duckduckgo.com/?q=kitten+cannon

No, it's a bump up in the stock prices before they fall again

https://www.investopedia.com/terms/d/deadcatbounce.asp