CNN Business: America is in turmoil and stocks are booming. Is the market broken?

[OilemFirchen]

The S&P 500 closed Tuesday at the highest level in nearly three months. The Nasdaq has spiked 40% since March 23, fueled by the resilience of Big Tech, and is now within striking distance of all-time highs.

There are two major reasons for this: unprecedented stimulus from the Federal Reserve, and investors not wanting to miss out on monster returns once the economy recovers.

<snip>

Robert Shiller, the Nobel Prize-winning economist, told CNN Business that this backdrop of rising risks and surging stock prices leaves the equity market "vulnerable" to a setback.

"This is like a fire bell in the night. This moment. Suddenly seeing rioting in cities all over the country," Shiller said, quoting Thomas Jefferson's famous 1820 description of the extension of slavery in the Missouri Compromise as something that filled the founding father with "terror."

https://www.cnn.com/2020/06/03/investing/stocks-market-dow-jones-riots-coronavirus/index.html

Much more at the link.

Nice to see a piece which quotes economists, rather than traders, weigh in:

"The market is broken. It no longer reflects a forward outlook that is truly aligned in the real economy," (Joe Brusuelas, chief economist at RSM International) said. "That's a problem because at some point, the public will say these markets are rigged.

[SoonerPride]

1. it IS rigged. It isn't a "market" anymore, just runs on Fed money.

It has no relation at all to the economy, corporate earnings, or future growth (or contraction).

It is all Fed capital.

[Claustrum]

2. GOP and Trump knows that he is done if the stock market is at 15,000 right now

That's why they artificially pop up the stock market with no relation to our economic statues of our country. As soon as Nov comes and go, all of the money will be gone and the stock market will go into free fall. And if Biden were to win, it's good for them as they will blame it on Biden just like they did to Obama in 2008.

[SoonerPride]

4. this is exactly what will happen.

the free money will disappear and the market will crash.

and they will say it is res. elect-Biden's fault. when nothing is further from the truth.

[ProfessorGAC]

7. Annualized Returns During PINO...

...are still far lower than Obama's last 5 years, and lower overall than BHO's entire 2 terms.
That's the message dems need to pound on.
40% over 3 & 2/3rds years (since election day '16) is under 9%.
Obama's years averaged around 11.

[Claustrum]

10. All facts. However, there is still a sizable # of people that believes Obama's bad economy.

My dad told me he rather Bush's $10 dollar check over Obama's years. And till this day, they are still on the Trump train.

[ProfessorGAC]

20. Easy To Refute

Our problems haven't been facts. It's been salesmanship.
K.I.S.S. on messaging. No wonkiness. No detailed plans. No "we go high".
Pound on the simple FACT that the markets did better under OBAMA and make them prove they didn't.
Don't even explain it.
"Markets rose at a higher percent under Obama than Trump. That's a fact. You think otherwise, prove it!"
Over & over & over.

[Claustrum]

22. You assume they care about facts.

Trump era taught us that they don't.

[ProfessorGAC]

23. No I'm Not

Don't give them facts.
Use the facts to be certain.
Sell ideas by making them prove otherwise.
I said nothing about convincing them with facts.
Use their tactics against them. Say something with certitude and dare them. They'll do nothing but fail.
At least in our case, we start with the truth.

[Yavin4]

5. That Fed money should be used by banks to prop up small businesses and mortgages

Not Wall Street hookers and coke.

[SoonerPride]

6. the Fed only cares about Wall St.

Main street can be boarded up and a ghost town.

Small businesses can all close.


They don't give a fuck

[Bernardo de La Paz]

3. The economy is rigged. This level of wealth & income inequality won't last. . . . nt

[unblock]

8. the market is not the defining metric on how well a country is doing

it only measures profitability of public companies. if there's highly profitable event that makes everyone miserable, the market would go up. if there's something that makes everyone happy but costs businesses, the market would go down.

in this case, the mostly of the market's good days lately are the market realizing that things aren't as bad as they initially feared, in terms of profitability, at least.


on the other hand, the markets are also still digesting the trillions of dollars the government pour into them when everyone panicked a couple months ago....

[Mike 03]

15. This makes sense at least to me

Especially considering how markets all but ignored the China/Hong Kong story. It had overreacted to the pandemic (in the opinion of the market, that is) to such a degree that its reaction to Hong Kong was masked. It probably did react, but it was hard to see because of all the momentum.

[struggle4progress]

9. It got a trillion dollar infusion

[OilemFirchen]

11. $2.3 trillion.

Plus junk bond purchases.

[MoonlitKnight]

13. Actually over $7 trillion

And growing.

[OilemFirchen]

14. That was my understanding, too.

I can't find a cite for it, so quoted the Fed's "official" injection total.

Add to that reducing the prime rate to zero. Bingo! Instant exuberance... and it's all free!

[MoonlitKnight]

16. Here it is

https://fred.stlouisfed.org/series/WALCL

https://www.marketwatch.com/story/feds-balance-sheet-nears-7-trillion-mark-2020-05-14

[onecaliberal]

12. Of course it's effing rigged. My god.

[Mike Nelson]

17. Well...

... big businesses like the collapse of small businesses.

[Wounded Bear]

18. The Stock Market has been largely decoupled from the general economy...

It's not much more than a casino with everybody wagering on credit accounts.

The actual value of most companies is probably a fraction of the stock values.

[JDC]

19. The market is a scam.

[moondust]

21. Interest rate cuts

may have pushed some savers into the casino trying to get some return on their savings. Probably just what Dump has been wanting in order to get the markets to "look good" for him.