I ask this almost every week, but what the hell is going on with the Dow?

[GusFring]

I don't remember a time where nothing seems to stop it. It has to be the treasury right?

[IggleDuer]

1. The more people unemployed...

...the more people in the job market are getting desperate and are willing to accept lower wages. Lower wages excite Wall Street.

[TreadSoftly]

2. Possible factors

1. If my company sheds thousands of jobs, that's a good thing because I am spending less and maybe focusing better on business.

2. Since business is bad, my company can chew up smaller, weaker companies. So the indexes get reshuffled as companies disappear, and the remaining business look strong.

3. Interest rates are still low. And yes, Treasury is giving a lot of confidence.

4. Some companies are going gangbusters: Amazon, Clorox come to mind. Also the vaccine companies (but that's going to be a gamble).

5. Housing should be a mess, but instead it seems that buyers match to sellers pretty well in volume (i.e. lots of people pulled back from selling, and lots of people pulled back from buying, in equal numbers).

I welcome dissent! It's been a puzzle for me also.

[GusFring]

4. It is fucking chaos in this country, yet the dow is over 26k and the economy is still

Closed. I can under stand hovering around 20k, but this is crazy.

[dawg day]

12. I think you're right about what the investors are thinking-

They're kind of short-sighted here. The economy is going off a cliff. There's absolutely NO consumer confidence. No one knows if they'll have a job in 3 months (if they have a job now).

The huge market really can't coast on Amazon and Purell selling bunches. But they've spent 3 years acting like Trump is great for the economy.

[sfstaxprep]

3. Saving This Page While Waiting For An Answer nt

[Turbineguy]

14. The markets are a view 6 months forward.

When trump will have lost the election.

If it craters in August it's because trump will start WW3 as a distraction.

[DBoon]

5. Because we really have two economies

one where capital is invested, the other where people buy stuff with wages and salaries

The first economy is doing well.

The second one isn't

[spooky3]

6. The stock market is a leading indicator

and investors think Biden will win and we will return to the Obama economy.

How’s that for a theory?

[Hoyt]

7. Where else do investors have to put money? Market is looking out

months ahead, well into 2021 if not 2022. Things are getting better, more is known about CV19 and treatment, it’s clear it’s not likely to kill 2 million, countries hit harder than us (at least to date) are improving, etc. Governments globally responded to head off worst economic impact.

If you don’t accept that, howsabout market thinks Biden and Dems will win in landslide, and TP is available again.

[dawg day]

8. The "market" is supposed to be intelligent and a good predictor

But what are these investors seeing ahead?

I don't get it. I wish I had a few thousand $ to spare so I could short the market.

[CabalPowered]

9. Treasury is blowing up the balance sheet

They're buying ETFs ffs. Printing digital dollars to buy synthetic instruments is .. insane.

[A HERETIC I AM]

13. The US Treasury is not buying ETF's. The Federal Reserve is.

And they aren't buying stock ETF's, rather they are buying Bond funds, which has a different effect on the market and is intended to be a backstop on the bond market. Such a backstop will not directly inflate stock prices.

https://www.marketwatch.com/story/the-fed-is-going-to-buy-etfs-what-does-it-mean-2020-03-23

If you have information to the contrary, I'll gladly edit this post to reflect that.

And if you are saying Exchange Traded Funds are "Synthetic Instrument", then I beg to differ.

They aren't synthetic in any way, shape or form. A standard equity or bond based ETF is a pretty straightforward way of buying a basket of those issues or other securities particular to a specific index or asset class.

Nothing synthetic about them.


And FWIW, since Bond funds, be they Mutual Funds, Exchange Traded or Closed End, ALL pay interest payments to the holder, regardless of who it is, the Fed stands to make money on these trades. Any and all profit they may realize is transferred to the Treasury, in accordance with the Fed's charter.

[UpInArms]

20. maybe this is part of it

https://www.cnbc.com/2020/05/22/central-banks-are-creating-fake-markets-bank-of-america-strategists-say.html

“Government and corporate bond prices have been fixed by central banks ... why would anyone expect stocks to price rationally?” Hartnett said.

Central banks have deployed a total of around $4 trillion of asset purchases over the past eight weeks, Hartnett highlighted, and the global equity market cap has surged by $15 trillion.

In the same period, central banks have been buying $2.4 billion per hour of financial assets, which Bank of America strategists expect will fade to $608 million in the coming weeks.

[A HERETIC I AM]

27. Interesting

This was a bit jarring;

"The rally has been concentrated in growth-focused tech names, and the market cap of the FAAMG (Facebook, Amazon, Apple, Microsoft, Google) stocks now exceeds that of the entire euro zone equity market."

Wow!

Fascinating read. Thanks!

[grantcart]

23. +1 good post

[MLAA]

10. Ponzi scheme

[cilla4progress]

11. Rigged?

Russian oligarch money? Would not be a shock.

[GusFring]

15. Well I give up trying to figure it out. He'll probably get re-elected from this alone.

[BannonsLiver]

16. Yeah.

[ProfessorGAC]

17. It's In Full Casino Mode

The earnings prior to COVID justified a Dow of 25-26k. Never was 28-30k rational.
An adjustment was coming and COVID triggered one, including a massive profit taking sell off after 9 years of excellent growth.
Nearly 30k was foolishly high. 18k was an overreaction.
The analysts all know this.
Now, they're planning long term results again anticipating a long slow recovery.
Short term investors are just gambling on a fairy tale of a v shaped recovery.
When the fallout of retail closures hits and the GDP contraction is not just "a virus thing" the short term folks are going to get a haircut.
Those investing for 5-10 year holding will be OK.

[uponit7771]

18. K&R, ***NOTICE***: Very few of the huge up legs happened during the trading day nearly all of them

... happened after hours.

I spent nearly 1/3 rd of my career involved processing broad market and rarely do we see treasuries trailing 52 week highs like this.

Someone is poring a lot of money into FAANG off hours ...

The VIX is nearly twice what it was during the peek but the NASDAQ is 100 points away ?!

WTF ?!

This is not organic at all

[UpInArms]

19. Central banks are creating 'fake markets,' Bank of America strategists say

Stocks have become detached from reality due to recent interventions from central banks into the bond markets, according to analysts at Bank of America.

In a research note Friday, the Bank of America Securities division highlighted the question of why the stock market is so divorced from reality as one of the most frequently asked by investors.

Despite the economic crisis brought about by the coronavirus pandemic, which has so far seen 38 million Americans file for unemployment and brought about sharp contractions in global GDP (gross domestic product), risk assets have been rallying of late.

As of Friday morning, the S&P 500 is up more than 14% and the Dow Jones Industrial Average more than 11% so far this quarter, rebounding from a historic sell-off in March as the coronavirus spread in the U.S. and throughout the rest of the world.

https://www.cnbc.com/2020/05/22/central-banks-are-creating-fake-markets-bank-of-america-strategists-say.html

[GusFring]

24. Now this is what I suspected.

[Yavin4]

21. It's the Federal Reserve Bank. Always has been. Always will be.

The markets are nothing more than a reflection of interest rates.

[Tommy_Carcetti]

22. I've said it over and over again: The Dow is like a big, stupid dog.

Easily distracted by whatever runs in front of it at the moment, no matter how innocent or dangerous it might turn out to be.

It's far less cute, though.

[Hortensis]

25. Broken. nt

[tinrobot]

26. All it means is that, when it does crash (and it will), the downturn will be epic.

[Music Man]

28. The market is just one slice of the economy.

Muscle weighs more than fat, so if someone weighs more than they used to, is it because they are eating unhealthfully or because they've been exercising and putting on muscle? Only context and information about the person will tell you the truth.

The market responds to odd things on a short term basis. Today's bounce may be because the unemployment rate went down. Now, cooler heads know that 13.3% is still an unbelievably high, dangerous unemployment rate (and those numbers may actually be higher when adjusted for Covid), but investors may seize on that sort of thing in their day-to-day plans.

Same with the housing market. Rates are low right now, which is appealing to many, but people are losing work and income and inventory is low due to the pandemic. So is it a good time to be a buyer or a bad time? Depends on your circumstances, and that is why certain economic indicators are not necessarily reflective of people's lives or what's happening in the country.

I love this thread. Thanks for provoking such a great discussion, GusFring.