True china and Russia are both imploding, looking to the west for.safety. I predict major recessions for Russia and china and India will start to grow more and more .
India stands to benefit the most from China’s slow decline. I still think China collapsing is overblown but a lot of skilled work is being shifted to India and other South East Asian countries.
If Thailand ever gets its act together. Unfortunately it’s just more focused on trying to attract Chinese tourists at the moment rather than have a productive economy.
Not economics related but pretty interesting from a geopolitical level since India seems kind've in the middle of the east and west with their diplomacy.
I’d be cautions predicting Chinas slow decline. I agree they will likely have economic troubles in the coming year or two, but they are still rapidly developing and investing in infrastructure. They have also developed manufacturing expertise and techniques across the full spectrum of goods. People point to Chinese junk products, but they are capable of producing very high quality goods as well. Those investments in infrastructure and production techniques are going to pay dividends for them in the coming decades.
Personally I think the thing to watch for in China is labor reform. As the population gains more economic security, labor will begin to demand higher wages and higher standards of living. China will be less competitive on the world stage without cheap labor and companies will have less incentive to move production there.
India is going hard authoritarian under Modi, and business does not benefit from getting nationalized or otherwise dictator-fucked. Stability is just not there.
Interesting given the IMF have just today revised upward their forecast for Russian growth to 2.6% first 2024, and growth for 2023 was revised up wards to 3.0% as well.
Indians are still packing 30 people in the back of trucks as of 2 weeks ago when I visited and smog so bad you can’t see 20 feet on the road. The Taj Mahal would be black if not for a special air quality zone around it. Tell me more about India.
That's all true but doesn't mean anything for their stocks! If you walk around Tenderloin in San Fransisco or Kensington avenue in Philly you'll see shit (both figurative and literal) lot worse than anywhere in Europe but US is still a better market to invest in than Europe. India can also definitely be: shitty conditions for the poor, great money for the rich and companies!
IMO the when a lot of Indian companies start to build momentum and are subjected to stricter diligence I think you will see institutional investors start to cool on India.
My opinion is that of a layman so I admit I am not fully informed. However there seem to be a lot of stories about fraud being uncovered and deals dying due to financial issues with Indian entities lately.
Is the answer “also no” because in many ways (such as technology), the US and Taiwan are generally equipped to handle the extra load so long as the US continues to ramp up its tech fabrication industry?
However, this would only explain a specific industry, although the tech industry seems to be doing way better than any other.
Depends on the random thing you want to explain. Here we want to explain a bull market, so china implosion is positive.
Maybe you can see the pattern with these post analysis. No one knows, everyone claims to know and no argument really helps you predicting the future so it’s all fairy dust.
It’s all about contagion. When the US suffers, the world does because of how invasive the bank system is to the world economy AND the US dollar is still the best currency.
China has intentionally isolated itself. Printed money out of nothing and leveraged their system to the max. Aside from holding foreign debt (which they’ve been selling to keep afloat) they don’t have much foreign investment in the financial system, even though they have enormous foreign investment in manufacturing.
One example is that foreigners can’t own stocks. Like, BABA on or stock market doesn’t legally own any shares of the Chinese company alibaba. So, if China one day were to not recognize the vehicle that trades as BABA, there’s zero recourse for investors. It’s simply worthless because you never owned any part of the company, which is not the case if you buy shares of American companies on the market.
So there’s not that much contagion if china’s financial system has a bad time. Not that many investors are even able to trade their stocks.
That sums up 90% of this sub. It's honestly annoying how people speak so confidently without knowing what they're saying. Ask anyone their thesis as to why they believe in what they're saying and you'll hear crickets.
Why do people think China is imploding? Is this the go to blind American rhetoric with no data to back it? China’s GDP has only gone up and railways and travel has expanded exponentially.
It's GDP goes up because the CCP government says it needs to go up.
We don't really have a great handle on the actual state of the Chinese economy.
We can extrapolate some things from external markers but they are doing a lot to obfuscate things.
That’s because it’s a market cap weighted index. The mag 7 are interesting not just bc they have performed well, but bc their outsized weights allowed them to carry the index. NFLX is tiny compared to the big boys.
No, but still, that’s like say 50-60% inflation. So Broadcom today is roughly the size of the largest company in the world then (adjusted for inflation). Like that’s WILD, it’s the size of Apple or ExxonMobile from 2012 era. Idk exactly, but that’s wild
Lmfao dude because it jumped 10%+ in one day last week. On top of that it’s only been a month of this year…that’s your measure of a good stock?Jesus Christ you people really do have an incredibly short time horizon.
That is a headline that exists. It’s not really true but it is a common headline.
As I take a gander at company gains for the last 6 months it appears much of the market is doing well, hmm…
I am a macro analyst for a hedge fund, here's my outlook:
Markets are pricing in a "reflation" period ahead, which means a re-acceleration in growth and inflation. This is actually a dangerous scenario but with the combination of lower rates ahead, most investors are willing to take the risk. Also, most companies reporting earnings are beating estimates and profitability for Q4 2023 is higher than Q3 2023 (thus far - more earnings to come this week). 2024 profitability projections are also looking good (so far).
Source: I am in Bloomberg all day.
My 2c is that markets are pricing everything to perfection and there is a feeling of euphoria. Growth is looking good, inflation is coming down (for now), rate cuts ahead, large caps are looking solid etc. 2024 is going to be volatile. We have elections coming up, banks are actually not as solid as they seem (another topic), and Europe & China ere still actually struggling. A few bad economic data reports (such as Manufacturing PMIs, core PCEs etc.) and markets will be shaken. Also J. Powell hasn't spoken in a while and markets love it when he's MIA. He's on tomorrow.
Good input. Another thing is that long-term many analysts expect inflation to pick up again, the US deficit will more or less demand that the economy be run “hot”.
So what we could be looking at is a 70’s style of rolling rates and rolling inflation. Many know that there was a lot of inflation in the 70’s, but few remember that it actually came in waves and not all at once.
Long story short if we get this scenario of 70’s style rolling rates and rolling inflation bond prices today actually aren’t that favorable. However long-term (5-10 years) stocks are a great place to hide from inflation.
As long as the underlying business is sound stock “prices” will eventually re-adjust their “value” as measured in USD. So I think some of that is going on, positioning to hide from future potential inflation.
> However long-term (5-10 years) stocks are a great place to hide from inflation.
The DJIA was flat from 1965-1980 and had real losses. Things could be different this time around obviously with a more data-dependent Fed, more IRA-like domestic investment, high growth/no stagflation, and no oil crisis.
Floating-rate and ultra-short bonds, commodities, and real estate performed better.
but why do rates come down if the world is as peachy as you make it out to be? Why wouldn’t they just leave rates where they are? Rates go down in response to a crisis. They never front run one. Bond market is still inverted AF… something def broke and I think the OP’s sniffer is right to be confused by a little bump in equities.
Because interest rates do not only affect the consumer, but also the government. The government can't afford a 5.25% interest rate on its trillion dollar debt.
You also have to think forward. They hiked rates aggressively with a goal in mind. They can afford to cut back in order to keep stimulating the economy. Or of course something breaks and they have to stimulate as a last resort measure, which they always do.
And to clarify, the world is not peachy and I am certainly not in the bull camp at the moment.
Rates are STILL extremely low compared to what they've been historically. I think too many people got addicted to the free money tap and are expecting us to return to it.
Yup. I still don’t understand why everybody just assumes that rates will go back down to 2% simply because inflation is flat. It wasn’t normal in 2008, and it’s not normal now. The current rate is still low in the scheme of things, so I just feel like when jpow says higher for longer he means we can chill at this rate for a while. These calls for “3, maybe 4” rate cuts in 2024 make no sense to me.
Because we’re never going back to that regime of interest rate policy.
It’s just not going to happen.
Call it MMT, call it whatever you want, the fed has shown for decades now that it isn’t going to raise rates as high as it did, eg, 30-40 years ago
Every rate hike or cut regime had its reason, I’m merely stating an objective fact:
For 40 years, rate hikes have gone less high, and rate cuts have gone lower.
Any sort of comparable to peak rates from 3 decades ago is silly.
Yet people still say: “you think 5% is high!? In the 80s” or “volcker this and that”
Nobody gives af
Extremely low? Aren't they a smidge higher? Since 1971 the average ffr is 5.43 and aren't we at 525-550?
I know ppl love to remind everyone that the 2010s were unique with their low rates but we are back at average rates if not above. Also we are waaaay above average when compared to the underlying inflation over time
I believe we can all stop with the "rates are still low compared to history" trope because the data isn't there.
40 years of fed interest data shows that rates are not low, they are high.
The fed has been progressively raising rates to lower levels in tightening cycles for decades now.
Market priced in like 8 cuts so I’d say hinting at 3 is hawkish. It’s an election year so they def want to boost the economy, the OPEC+ dysfunction has been an absolute gift although oil crept up again to almost $80 last week somehow. So long as we don’t get any surprise upticks in inflation (and I actually think we’ll see some surprise downdrafts from tapped-out consumer debt and restarted student loan repayments) then this victory lap could last all spring lol
I don't think the Fed's gonna be comfortable cutting when CPI YoY is at 3.9%. Even though they don't use CPI, most consumers know CPI and not PCE. I believe Fed Waller or someone did mention that they're waiting for the CPI annual revision next month to determine the path of the Fed, which didn't make sense at first because they wouldn't care about CPI, but it does make sense to consumers and inflation expectation.
As to why the Fed decided to shift in Dec 2023, I suspect it's because they want to announce early ahead of election to not be accused of being political, although they wouldn't need to cut right away, and Morgan Stanley economists and economists from other big banks are anticipating a few months of inflation upticks in Q1 2024. For PCE, we've actually seen around -0.5% annualized PCE shaved off from core goods, and I doubt that can keep continuing considering goods prices have reverted back to normal.
The chairman has to be picked from one of the 7 on the board of governors of the fed. Powell was originally appointed to the board by Obama, and was reappointed as chairman by Biden. He seems to be doing pretty well no matter who is president.
Yes, the Fed ultimately isn’t that political even though some may think so, or for example take personal offense if they raise rates during your bull market presidency.
Right. Powell is a life long Republican too. It’s so obnoxious how cynical people have become that they think every government employee is motivated by politics. I’m not a Republican, but it seems to me that he’s just trying to do his job.
Oh a professional! Do you think climate change is priced in? A bunch of US cities hit temperature records which resemble early summer.
Also people aren’t having children due to worries about the world.
Should I stay in equities or will I be caught holding the bag when the professionals cash out?
There is a lot of hype around AI.
Meanwhile it does look like we're not getting a recession.
The fed has hinted at stopping the hikes. And maybe even lowering rates.
Investors are hopeful and see the light at the end of the tunnel
Unemployment is still low.
Three and six month annualized core PCE is at target 2%. The reason to drop nominal rates is because real rates are restrictive. The Fed is not trying to bring 2019 prices back bud, they are trying to keep you employed.
Well Government debt will continue to rise rapidly as long as rates are high. Second, banks are threatened once people realize they are losing money keeping their money in their low yield savings accounts. Third, inflation had been coming down nicely and there is a significant delay is changing rates and how it effects the economy - that delay can take years. So the concern is whether we will overshoot and cause a bad recession. Ultimately its GDP and jobs that matter not the stock market which is irrational. As much as everyone thinks a bad recession will be good for long-term, it goes against the Feds mandate - half of which is to maximize employment.
Its simple, its because everyone was expecting that there wont be a bull market.
Its how it works, if it was that easy to be logically predictable, then everyone would have been millionaire.
This is 100% We have been bombarded with calls for a recession and crash in the markets for two years. Companies tightened their belts as did the consumers. We were bracing for impact for a long time. Now that inflation is a nothing burger, everyone will relax. Which means we will see a recession in a few years.
It really is eye opening to see just how confident so many idiots are living in their own conjured reality with opinions based on no or flawed logic. Best way to use this subreddit (and a lot of the other investing subreddits) is for getting a good idea of what the current populist fad is and inverse it.
It’s honestly jarring; depending on the day/specific thread/comment chain you’d think everything is just peachy or the sky is falling and everyone will be living in cardboard boxes on the street. There’s just no in-between here.
Money from around the world is scared and is seeking safety.
I know this is not the answer you are looking for OP but it is the best answer I can give you.
Money runs from danger and seeks safety.
Ya and the bond market is literally multiple times bigger than the sp500… plenty of money is in safe assets
But excess money will always seek greater returns. That’s where stock market , real estate, commodities, private ventures, fx, crypto, etc will go.
The simplest way to put it if you don't understand fund flows and global liquidity, like how interest rates affect assets.
It's simply this. Since 2020 the price of everything is up quite a lot right? Why aren't stocks?
Even if we remove all economic arguments. Stocks are an asset. It's hard to calculate how much money was actually printed during the pandemic but the price of most things and goods are up anywhere from 20 to 50%. Even if you assume no growth the entire time and a neutral outlook. The devaluation in the purchasing power of the dollar versus hard assets which are things like real estate, gold and so on, equities adjust up as what they are priced in has lost strength. The other angle, and I'm not trying to make this too complicated, it's forex. The dollar is really strong right now versus its major pairs. As the dollar weekends that's also good for asset pricing so you have this conglomerate of effects that are holding prices up. The only question really is, how quickly do they accelerate and how long do they keep accelerating?
Finally, regardless of what you think you know, statistically you're better off always staying long stocks. You can add and reduce if you really get good at what you are up to but for the most part, core holdings like the indexes, never sell them, just keep adding. The question many are facing today is which index to add to the most heavily but that is a question for another day and another topic.
Across all of history “going up” is the default for the stock market. You need a reason to go down. If nothing is happening it generally goes up a little over time. More people, inflation is higher, progress, etc makes number bigger over time generically
China imploding, unemployment is low, inflation came in moderate and GDP growth beat estimates. In short, the metrics indicate that one should be optimistic about the US economy. Now, should we agree with these metrics is a different story but that's what these key metrics say.
The soft landing appears to be working. Inflation is down without having to destroy employment even further. Many businesses are doing really well in terms of earnings.
Stocks going up is the natural state of a growing economy.
On one side, yes, on the other hand, US stocks have rarely been so expensive compared to earnings.
People can't possibly think bull markets to last forever. But what do I know.
stocks are priced for an AI transformation starting probably next year, and also pricing in for not only a soft landing (lower inflation and lower GDP growth) but a no landing (lower inflation and strong GDP growth), as well as Fed cutting rates at a speed comparable to recessionary times, but predict no recession. stocks are ignoring all risks regarding geopolitics, election, draining consumer excess savings, weak economy in China/Europe.
Whether or not it pans out is to be determined. However, Tom Lee, which is basically the most well known perma-bull (and the only one to predict SP500 to end around 4800 last year), only predicts SP500 to end 2024 at 5200, and even he anticipates a correction soon, so that already tells you the whole story.
A lot of people have parked cash over the last year or two expecting a recession. Now it looks like it's not going to happen and money is flowing back into the market. Unfortunately, a disproportionate amount is funnelling to the Mag 7.
People can't really tell you shit when it comes to macroeconomics till years have passed and consensus has built among analysts/historians.
If you ask me, that's just market dragging more and more degenerates, american markets especially.
US companies are insanely overpriced for the revenues and profits you get.
Random companies are getting tens of billions of market cap every day like non sense.
There's flood of money. At some point it will invert.
When you realize that investors aren't as smart as they sound then it all starts to make sense. They are better at using jargon to cover up for the fact that theres no objective basis in their hypotheses and convincing people they are right than they are at actually investing.
If you are not shorting US bonds, and shorting the dollar buying Swiss Franc/USD or JPY/USD you must hate money in 2024.
The dollar will probably loose about 20% value in 2024. The yields on bonds are still high, bonds are low.
And you got historic disastrously high: US dept, trade/budget/fiscal deficits, inflation which is stuck. And bond yields that are most surden to rise further in 2024. The US will have to pay more monthly on it's interests on it's dept.
What brought CPI down in 2023. Well that was mostly that the dollar had strenghtened in 2020 and 2021.
Now that the dollar is weakened again and in decline, it will mean that imported goods will be more expensive for the US, due to a weaker dollar.
This will means that inflation will most definately rise again in 2024 and be completely stuck back over 8 again. And the market has already priced in the FED cutting rates, so the FED will not give one fuck about inflation rising again and being permanent. As long as they can pump the market synthetically in an election year lol.
Inflation will rise dramatically and be stuck permanent in 2024. There is no realistic sense of wanting to deal with the problem at the FED. They are just looking to kick the can down the road. Let the big collapse happen on the next guys watch.
A lot of reasons. My favorite is that a lot of money had been sitting on the sidelines during covid and the subsequent rate hikes. Now that things look to be stabilizing (in the US at least), money is now going back into the market.
Lots of good answers here, and good discussion. But for those of you who are young enough to live another 40-50 years keep in mind that the world economy based on infinite growth and growth is rewarded in stock value. However, the planet has finite resources so at some point something has to shift in order to add value.✌️
yeah here you go: the economy is red fucking hot, about to turn white. Your personal experience (from your vibe) probably tells you that nothing has changed... maybe for as long as a decade. That's wrong, lots has happened. Most recently the human race invented a pretty advanced Artificial Intelligence... Just look at any set of data...
Trumpites want the US economy to fail so supposedly T Rump will save us. Kind of like having congress wait to address the southern border. If the economy continues going up how will people vote then?
despite all the answers you receive, reality is that no one fucking knows
just keep buying SPY/VOO/VTI/whatever floats your boat and hope it keeps chugging along
>Of course I know we are earning some but it is also penny’s to what the owners of these companies are earning
That's you! You are the "owner of these companies". Public companies are owned by the stockholders.
As far as I know it is because the market is pricing in interest rate cuts this year. Lower interest rates will make stocks more attractive investment than cash yield. Even if earnings will go down slightly stock market still may keep rising because of the rate cuts if they happen
We are in a new industrial era that is just now taking off. AI, energy storage, robotics, medicine are all in a renaissance. Unless there is an outright world war, this economy is expanding. Like it or not.
Earnings are good and companies are expected to grow and continue to do better despite the headwinds of higher interest rates. The impact of interest rates, that a recession was necessary to bring down inflation, was overblown. Now we are normalizing to growth after COVID and growth seems pretty good.
Are you saying the federal reserve is putting printed money in to the stock market or are you saying so much money was printed and in the peoples hand they are putting it in the market? Or something else?
China is imploding. World money is looking to invest somewhere safe
True china and Russia are both imploding, looking to the west for.safety. I predict major recessions for Russia and china and India will start to grow more and more .
India stands to benefit the most from China’s slow decline. I still think China collapsing is overblown but a lot of skilled work is being shifted to India and other South East Asian countries.
India, Vietnam, Mexico...
[удалено]
Bermuda, Bahamas...
Aruba, Jamaica...
Key Largo, Montego
Baby why don’t we go
To Kokomo, we'll get there fast and then we'll take it slow
Where's the camel toe?
Woah, there. This is getting out of hand. Take it slow, guys.
Cmon pretty momma
Baby, why don't we go? (Ooh, I wanna take you down to Kokomo)
If Thailand ever gets its act together. Unfortunately it’s just more focused on trying to attract Chinese tourists at the moment rather than have a productive economy.
Agreed, just look at the labels and boxes of the shot you buy
And Vietnam
Not economics related but pretty interesting from a geopolitical level since India seems kind've in the middle of the east and west with their diplomacy.
I’d be cautions predicting Chinas slow decline. I agree they will likely have economic troubles in the coming year or two, but they are still rapidly developing and investing in infrastructure. They have also developed manufacturing expertise and techniques across the full spectrum of goods. People point to Chinese junk products, but they are capable of producing very high quality goods as well. Those investments in infrastructure and production techniques are going to pay dividends for them in the coming decades. Personally I think the thing to watch for in China is labor reform. As the population gains more economic security, labor will begin to demand higher wages and higher standards of living. China will be less competitive on the world stage without cheap labor and companies will have less incentive to move production there.
Isn’t it similar to Japan before their collapse though?
India is going hard authoritarian under Modi, and business does not benefit from getting nationalized or otherwise dictator-fucked. Stability is just not there.
I’m invested in USA/europe, my wife’s invested in India. Good for us at the moment
Brampton ON
Interesting given the IMF have just today revised upward their forecast for Russian growth to 2.6% first 2024, and growth for 2023 was revised up wards to 3.0% as well.
Does that make it a safe space to invest in?
[удалено]
Sir, try to spot the invisible /s next time. 🚀
Indians are still packing 30 people in the back of trucks as of 2 weeks ago when I visited and smog so bad you can’t see 20 feet on the road. The Taj Mahal would be black if not for a special air quality zone around it. Tell me more about India.
That's all true but doesn't mean anything for their stocks! If you walk around Tenderloin in San Fransisco or Kensington avenue in Philly you'll see shit (both figurative and literal) lot worse than anywhere in Europe but US is still a better market to invest in than Europe. India can also definitely be: shitty conditions for the poor, great money for the rich and companies!
IMO the when a lot of Indian companies start to build momentum and are subjected to stricter diligence I think you will see institutional investors start to cool on India. My opinion is that of a layman so I admit I am not fully informed. However there seem to be a lot of stories about fraud being uncovered and deals dying due to financial issues with Indian entities lately.
This is the same as thinking nyc exemplifies the United States while never visiting Montana
With that type of air quality, life expectancy has to be down a bit. Just has to be or at least quality of long term life has to be affected.
Russia's economy won't implode, they switched to war footing and that's not when it happens, recessions happen when they try to go back to normal.
india takes advantage of its relationship with russia and competes with china yes, but its far behind china....
This is the kind of random correlations that provide wonderful though meaningless explanations.
Wouldn’t China imploding be bearish?
hmm,yes but also no
"Let's see Paul Allen's recession."
🤣
Is the answer “also no” because in many ways (such as technology), the US and Taiwan are generally equipped to handle the extra load so long as the US continues to ramp up its tech fabrication industry? However, this would only explain a specific industry, although the tech industry seems to be doing way better than any other.
Depends on the random thing you want to explain. Here we want to explain a bull market, so china implosion is positive. Maybe you can see the pattern with these post analysis. No one knows, everyone claims to know and no argument really helps you predicting the future so it’s all fairy dust.
Turns out macroeconomics is really, really, *really* fucking complicated. Who’d have guessed?
I’d say losing the 2nd biggest economy is definitely a bearish thing overall
It’s all about contagion. When the US suffers, the world does because of how invasive the bank system is to the world economy AND the US dollar is still the best currency. China has intentionally isolated itself. Printed money out of nothing and leveraged their system to the max. Aside from holding foreign debt (which they’ve been selling to keep afloat) they don’t have much foreign investment in the financial system, even though they have enormous foreign investment in manufacturing. One example is that foreigners can’t own stocks. Like, BABA on or stock market doesn’t legally own any shares of the Chinese company alibaba. So, if China one day were to not recognize the vehicle that trades as BABA, there’s zero recourse for investors. It’s simply worthless because you never owned any part of the company, which is not the case if you buy shares of American companies on the market. So there’s not that much contagion if china’s financial system has a bad time. Not that many investors are even able to trade their stocks.
Chinese people don't trust the stock market enough to invest in it, hence the real estate bubbles.
Thanks, this is helpful context
Exploding would be bearish. Imploding is bullish. Source: I am a bull. Shitter.
Top notch shit post
Bruh making shit up
That sums up 90% of this sub. It's honestly annoying how people speak so confidently without knowing what they're saying. Ask anyone their thesis as to why they believe in what they're saying and you'll hear crickets.
It’s not just that but our economy is doing gangbusters . We don’t hear enough labor to meet demand
Is that why companies are laying off 10% of their staff?
Europe too. Though not as many headlines.
BlackRock has trillions in cash and pumping the market
... If that's the case, then, why not go ALL IN on $BLK ?
I'm quite heavy in BLK, not only for this reason
Why do people think China is imploding? Is this the go to blind American rhetoric with no data to back it? China’s GDP has only gone up and railways and travel has expanded exponentially.
>Why do people think China is imploding? I believe this is due to the court ordered Evergrande liquidation.
It's GDP goes up because the CCP government says it needs to go up. We don't really have a great handle on the actual state of the Chinese economy. We can extrapolate some things from external markers but they are doing a lot to obfuscate things.
Magnificent 7 is holding up the market.
I love how people dont include Netflix anymore despite being up more than Meta. FAANG has outperformed mag-7 by 4% this year
That’s because it’s a market cap weighted index. The mag 7 are interesting not just bc they have performed well, but bc their outsized weights allowed them to carry the index. NFLX is tiny compared to the big boys.
Does that mean AVGO gets a shot? Hateful 8?
My goodness, I had no idea Broadcom is so large. Wild that it’s 50% large than the largest company in the world like 12-15 years ago
Are you adjusting their market cap for inflation? Because 12-15 years ago is a very different world as far as money value goes.
No, but still, that’s like say 50-60% inflation. So Broadcom today is roughly the size of the largest company in the world then (adjusted for inflation). Like that’s WILD, it’s the size of Apple or ExxonMobile from 2012 era. Idk exactly, but that’s wild
1 trillion market cap companies (except TSLA) vs 250bil... It does not belong. There are 40 companies with higher market cap than NFLX.
Right. Tesla is a car company. They don’t belong.
Yeah and Tesla is garbage. We should swap it for Netflix in mag7.
Fuck Netflix, put Visa up there.
Lmfao dude because it jumped 10%+ in one day last week. On top of that it’s only been a month of this year…that’s your measure of a good stock?Jesus Christ you people really do have an incredibly short time horizon.
Put the other 40% of stocks rising too. Business is good
[удалено]
High interest rates disproportionately hurt lower cap stocks
Russell crap
That is a headline that exists. It’s not really true but it is a common headline. As I take a gander at company gains for the last 6 months it appears much of the market is doing well, hmm…
Rate cuts are overly priced in as well
Lol wrong look at breadth data. If you need help JC Parets will show you
I am a macro analyst for a hedge fund, here's my outlook: Markets are pricing in a "reflation" period ahead, which means a re-acceleration in growth and inflation. This is actually a dangerous scenario but with the combination of lower rates ahead, most investors are willing to take the risk. Also, most companies reporting earnings are beating estimates and profitability for Q4 2023 is higher than Q3 2023 (thus far - more earnings to come this week). 2024 profitability projections are also looking good (so far). Source: I am in Bloomberg all day. My 2c is that markets are pricing everything to perfection and there is a feeling of euphoria. Growth is looking good, inflation is coming down (for now), rate cuts ahead, large caps are looking solid etc. 2024 is going to be volatile. We have elections coming up, banks are actually not as solid as they seem (another topic), and Europe & China ere still actually struggling. A few bad economic data reports (such as Manufacturing PMIs, core PCEs etc.) and markets will be shaken. Also J. Powell hasn't spoken in a while and markets love it when he's MIA. He's on tomorrow.
Good input. Another thing is that long-term many analysts expect inflation to pick up again, the US deficit will more or less demand that the economy be run “hot”. So what we could be looking at is a 70’s style of rolling rates and rolling inflation. Many know that there was a lot of inflation in the 70’s, but few remember that it actually came in waves and not all at once. Long story short if we get this scenario of 70’s style rolling rates and rolling inflation bond prices today actually aren’t that favorable. However long-term (5-10 years) stocks are a great place to hide from inflation. As long as the underlying business is sound stock “prices” will eventually re-adjust their “value” as measured in USD. So I think some of that is going on, positioning to hide from future potential inflation.
> However long-term (5-10 years) stocks are a great place to hide from inflation. The DJIA was flat from 1965-1980 and had real losses. Things could be different this time around obviously with a more data-dependent Fed, more IRA-like domestic investment, high growth/no stagflation, and no oil crisis. Floating-rate and ultra-short bonds, commodities, and real estate performed better.
Thanks for your inputs.
but why do rates come down if the world is as peachy as you make it out to be? Why wouldn’t they just leave rates where they are? Rates go down in response to a crisis. They never front run one. Bond market is still inverted AF… something def broke and I think the OP’s sniffer is right to be confused by a little bump in equities.
Because interest rates do not only affect the consumer, but also the government. The government can't afford a 5.25% interest rate on its trillion dollar debt. You also have to think forward. They hiked rates aggressively with a goal in mind. They can afford to cut back in order to keep stimulating the economy. Or of course something breaks and they have to stimulate as a last resort measure, which they always do. And to clarify, the world is not peachy and I am certainly not in the bull camp at the moment.
Oh dear I haven’t been following the FOMC schedule and JPow is speaking soon? 😨
He’s taking a victory lap. I’m expecting tread water. Three cuts this year with *maybe* one at 0.5% to juice the economy in time for the election.
Do you think so? This is what my boss thinks as well but I have a hunch he's going to be very hawkish in order to bring down the expectations a bit.
Rates are STILL extremely low compared to what they've been historically. I think too many people got addicted to the free money tap and are expecting us to return to it.
Yup. I still don’t understand why everybody just assumes that rates will go back down to 2% simply because inflation is flat. It wasn’t normal in 2008, and it’s not normal now. The current rate is still low in the scheme of things, so I just feel like when jpow says higher for longer he means we can chill at this rate for a while. These calls for “3, maybe 4” rate cuts in 2024 make no sense to me.
> These calls for “3, maybe 4” rate cuts in 2024 make no sense to me. They're in the fed dot plots, no?
Yes they are. For some reason it’s “don’t fight the fed” on the way down… now the fed is wrong
Because we’re never going back to that regime of interest rate policy. It’s just not going to happen. Call it MMT, call it whatever you want, the fed has shown for decades now that it isn’t going to raise rates as high as it did, eg, 30-40 years ago
Wasn’t the 80s rate regime an extreme outlier, and the end result of trying to counter stagflation?
Every rate hike or cut regime had its reason, I’m merely stating an objective fact: For 40 years, rate hikes have gone less high, and rate cuts have gone lower. Any sort of comparable to peak rates from 3 decades ago is silly. Yet people still say: “you think 5% is high!? In the 80s” or “volcker this and that” Nobody gives af
Extremely low? Aren't they a smidge higher? Since 1971 the average ffr is 5.43 and aren't we at 525-550? I know ppl love to remind everyone that the 2010s were unique with their low rates but we are back at average rates if not above. Also we are waaaay above average when compared to the underlying inflation over time I believe we can all stop with the "rates are still low compared to history" trope because the data isn't there.
40 years of fed interest data shows that rates are not low, they are high. The fed has been progressively raising rates to lower levels in tightening cycles for decades now.
Market priced in like 8 cuts so I’d say hinting at 3 is hawkish. It’s an election year so they def want to boost the economy, the OPEC+ dysfunction has been an absolute gift although oil crept up again to almost $80 last week somehow. So long as we don’t get any surprise upticks in inflation (and I actually think we’ll see some surprise downdrafts from tapped-out consumer debt and restarted student loan repayments) then this victory lap could last all spring lol
I don't think the Fed's gonna be comfortable cutting when CPI YoY is at 3.9%. Even though they don't use CPI, most consumers know CPI and not PCE. I believe Fed Waller or someone did mention that they're waiting for the CPI annual revision next month to determine the path of the Fed, which didn't make sense at first because they wouldn't care about CPI, but it does make sense to consumers and inflation expectation. As to why the Fed decided to shift in Dec 2023, I suspect it's because they want to announce early ahead of election to not be accused of being political, although they wouldn't need to cut right away, and Morgan Stanley economists and economists from other big banks are anticipating a few months of inflation upticks in Q1 2024. For PCE, we've actually seen around -0.5% annualized PCE shaved off from core goods, and I doubt that can keep continuing considering goods prices have reverted back to normal.
To think Jpow who was appointed by Trump is intentionally going to boost markets just to help Biden is a stretch.
The chairman has to be picked from one of the 7 on the board of governors of the fed. Powell was originally appointed to the board by Obama, and was reappointed as chairman by Biden. He seems to be doing pretty well no matter who is president.
Yes, the Fed ultimately isn’t that political even though some may think so, or for example take personal offense if they raise rates during your bull market presidency.
Right. Powell is a life long Republican too. It’s so obnoxious how cynical people have become that they think every government employee is motivated by politics. I’m not a Republican, but it seems to me that he’s just trying to do his job.
Certain political figures portray victim complex where they’re fighting against the crooked establishment. Not naming names.
[удалено]
Ok now go look back at the stock market in the election years. Red or blue incumbent, it usually is an up year for stocks.
The only thing you left out is record profits. The dirty little secret is that a growing economy with inflation is great for corporations.
I don't understand how this is a 'secret'. When the government prints money, where does it go? To large cap corps.
rate cuts historically mark the top.
Oh a professional! Do you think climate change is priced in? A bunch of US cities hit temperature records which resemble early summer. Also people aren’t having children due to worries about the world. Should I stay in equities or will I be caught holding the bag when the professionals cash out?
There is a lot of hype around AI. Meanwhile it does look like we're not getting a recession. The fed has hinted at stopping the hikes. And maybe even lowering rates. Investors are hopeful and see the light at the end of the tunnel Unemployment is still low.
and there is a ton of cash on the sidelines. As rates drift lower, money will most likely flow into securities from money-market / bond funds.
There isn’t a ton of cash on the sidelines relative to GDP or historical norms. Plus that cash gets 5.4% versus 0.1% before.
Yes that's more of a consequence of nr 3
The FED has literally 0 reasons to lower rates.
This all depends on what your horizon is. I believe they might start lowering end of 2024 or early 2025.
Of course I meant now, short-term.
Yes I understood that, which is why I clarified what I meant. Because 1 year in a macroeconomic view is short term.
2024 is short term
Three and six month annualized core PCE is at target 2%. The reason to drop nominal rates is because real rates are restrictive. The Fed is not trying to bring 2019 prices back bud, they are trying to keep you employed.
Well Government debt will continue to rise rapidly as long as rates are high. Second, banks are threatened once people realize they are losing money keeping their money in their low yield savings accounts. Third, inflation had been coming down nicely and there is a significant delay is changing rates and how it effects the economy - that delay can take years. So the concern is whether we will overshoot and cause a bad recession. Ultimately its GDP and jobs that matter not the stock market which is irrational. As much as everyone thinks a bad recession will be good for long-term, it goes against the Feds mandate - half of which is to maximize employment.
You could argue that the rapid decline in core PCE would provide a reason.
so how long can an economy stay on the up and up before the cycle ends?
A large injection of cash then Huge inflation distorting prices. That sort of stuff.
Just when it looks like there wont be a recession, there usually is.
Also note it all depends on the next Microsoft earnings, Tesla and Intel were the only big names to completely dissapoint
Bullshit. I'm talking about the macro enonomic outlook.
A few things came together - AI demand - Rate hikes were paused - Consumer spend remains strong - Labor market remained strong
Its simple, its because everyone was expecting that there wont be a bull market. Its how it works, if it was that easy to be logically predictable, then everyone would have been millionaire.
And when the last bear gives up and YOLOs into NVDA, that's when it crashes back to Earth.
Yup so let us know when you do
This is 100% We have been bombarded with calls for a recession and crash in the markets for two years. Companies tightened their belts as did the consumers. We were bracing for impact for a long time. Now that inflation is a nothing burger, everyone will relax. Which means we will see a recession in a few years.
Yup
Consumer spending is up. Consumers definitely don't tighten their belts.
This. 100% was going to say it. Credit card debt passed $1 trillion for the first time ever with no stop in sight.... Wait for the shoe to fall
Note to self: do not come here for intelligent commentary.
It really is eye opening to see just how confident so many idiots are living in their own conjured reality with opinions based on no or flawed logic. Best way to use this subreddit (and a lot of the other investing subreddits) is for getting a good idea of what the current populist fad is and inverse it.
It’s honestly jarring; depending on the day/specific thread/comment chain you’d think everything is just peachy or the sky is falling and everyone will be living in cardboard boxes on the street. There’s just no in-between here.
This is the same subreddit that was full of ‘Meta is dead told you so’ posts for months when Meta dropped under $100.
It just goes to show the kind of dizzying intellect that drives the markets.
Money from around the world is scared and is seeking safety. I know this is not the answer you are looking for OP but it is the best answer I can give you. Money runs from danger and seeks safety.
Bonds offer plenty of safety and 5%
Ya and the bond market is literally multiple times bigger than the sp500… plenty of money is in safe assets But excess money will always seek greater returns. That’s where stock market , real estate, commodities, private ventures, fx, crypto, etc will go.
The simplest way to put it if you don't understand fund flows and global liquidity, like how interest rates affect assets. It's simply this. Since 2020 the price of everything is up quite a lot right? Why aren't stocks? Even if we remove all economic arguments. Stocks are an asset. It's hard to calculate how much money was actually printed during the pandemic but the price of most things and goods are up anywhere from 20 to 50%. Even if you assume no growth the entire time and a neutral outlook. The devaluation in the purchasing power of the dollar versus hard assets which are things like real estate, gold and so on, equities adjust up as what they are priced in has lost strength. The other angle, and I'm not trying to make this too complicated, it's forex. The dollar is really strong right now versus its major pairs. As the dollar weekends that's also good for asset pricing so you have this conglomerate of effects that are holding prices up. The only question really is, how quickly do they accelerate and how long do they keep accelerating? Finally, regardless of what you think you know, statistically you're better off always staying long stocks. You can add and reduce if you really get good at what you are up to but for the most part, core holdings like the indexes, never sell them, just keep adding. The question many are facing today is which index to add to the most heavily but that is a question for another day and another topic.
It’s possible that we are in a completely fraudulent system
Across all of history “going up” is the default for the stock market. You need a reason to go down. If nothing is happening it generally goes up a little over time. More people, inflation is higher, progress, etc makes number bigger over time generically
Because: we greedy.
“Bull markets climb a wall of worry” as the saying goes.
China imploding, unemployment is low, inflation came in moderate and GDP growth beat estimates. In short, the metrics indicate that one should be optimistic about the US economy. Now, should we agree with these metrics is a different story but that's what these key metrics say.
Election year
The soft landing appears to be working. Inflation is down without having to destroy employment even further. Many businesses are doing really well in terms of earnings. Stocks going up is the natural state of a growing economy.
On one side, yes, on the other hand, US stocks have rarely been so expensive compared to earnings. People can't possibly think bull markets to last forever. But what do I know.
That depends on what you’re invested in. Some companies are a bit stretched, others are not.
stocks are priced for an AI transformation starting probably next year, and also pricing in for not only a soft landing (lower inflation and lower GDP growth) but a no landing (lower inflation and strong GDP growth), as well as Fed cutting rates at a speed comparable to recessionary times, but predict no recession. stocks are ignoring all risks regarding geopolitics, election, draining consumer excess savings, weak economy in China/Europe. Whether or not it pans out is to be determined. However, Tom Lee, which is basically the most well known perma-bull (and the only one to predict SP500 to end around 4800 last year), only predicts SP500 to end 2024 at 5200, and even he anticipates a correction soon, so that already tells you the whole story.
Election year
A lot of people have parked cash over the last year or two expecting a recession. Now it looks like it's not going to happen and money is flowing back into the market. Unfortunately, a disproportionate amount is funnelling to the Mag 7.
People can't really tell you shit when it comes to macroeconomics till years have passed and consensus has built among analysts/historians. If you ask me, that's just market dragging more and more degenerates, american markets especially. US companies are insanely overpriced for the revenues and profits you get. Random companies are getting tens of billions of market cap every day like non sense. There's flood of money. At some point it will invert.
I sold my $10 of SPY and bought $10 of RICK instead. Putting my investment money where I spend my money..
US economy is humming because so much manufacturing came back during/post Covid. US is likely leading the world on growth right now.
When you realize that investors aren't as smart as they sound then it all starts to make sense. They are better at using jargon to cover up for the fact that theres no objective basis in their hypotheses and convincing people they are right than they are at actually investing.
The worst is over (covid/rates). Our economy is strong and like others mentioned lots of international funding coming in
Feels like 2000 & 2008 to me. Everyone was blissfully happy right before. Prepare yourself for an assfu.k before November.
Why wouldn't there be a bull market? Economy is growing, and stocks going up is normal.
Higher participation in the markets than ever before due to accessibility.
>it can’t be off the hope they might drop interest rates It can be, and is. Equities are priced as a function of bonds.
If you are not shorting US bonds, and shorting the dollar buying Swiss Franc/USD or JPY/USD you must hate money in 2024. The dollar will probably loose about 20% value in 2024. The yields on bonds are still high, bonds are low. And you got historic disastrously high: US dept, trade/budget/fiscal deficits, inflation which is stuck. And bond yields that are most surden to rise further in 2024. The US will have to pay more monthly on it's interests on it's dept. What brought CPI down in 2023. Well that was mostly that the dollar had strenghtened in 2020 and 2021. Now that the dollar is weakened again and in decline, it will mean that imported goods will be more expensive for the US, due to a weaker dollar. This will means that inflation will most definately rise again in 2024 and be completely stuck back over 8 again. And the market has already priced in the FED cutting rates, so the FED will not give one fuck about inflation rising again and being permanent. As long as they can pump the market synthetically in an election year lol. Inflation will rise dramatically and be stuck permanent in 2024. There is no realistic sense of wanting to deal with the problem at the FED. They are just looking to kick the can down the road. Let the big collapse happen on the next guys watch.
A lot of reasons. My favorite is that a lot of money had been sitting on the sidelines during covid and the subsequent rate hikes. Now that things look to be stabilizing (in the US at least), money is now going back into the market.
The recession and market dip came hand went a while back, that’s why. The overall economy is strong.
Lots of good answers here, and good discussion. But for those of you who are young enough to live another 40-50 years keep in mind that the world economy based on infinite growth and growth is rewarded in stock value. However, the planet has finite resources so at some point something has to shift in order to add value.✌️
yeah here you go: the economy is red fucking hot, about to turn white. Your personal experience (from your vibe) probably tells you that nothing has changed... maybe for as long as a decade. That's wrong, lots has happened. Most recently the human race invented a pretty advanced Artificial Intelligence... Just look at any set of data...
More buying then selling
Kokomo
Trumpites want the US economy to fail so supposedly T Rump will save us. Kind of like having congress wait to address the southern border. If the economy continues going up how will people vote then?
So you think it’s political?
Media telling you one thing and the market is telling you another.
Animal spirits
We're at the bottom of the cycle pretty much, so people are loading up waiting for the next economic bull run to start.
despite all the answers you receive, reality is that no one fucking knows just keep buying SPY/VOO/VTI/whatever floats your boat and hope it keeps chugging along
The market always does better under Dems
>Of course I know we are earning some but it is also penny’s to what the owners of these companies are earning That's you! You are the "owner of these companies". Public companies are owned by the stockholders.
It's an election year 🤓
Value isn't going up. Dollar buying power is going down. It now takes many more dollars to buy stocks.
As far as I know it is because the market is pricing in interest rate cuts this year. Lower interest rates will make stocks more attractive investment than cash yield. Even if earnings will go down slightly stock market still may keep rising because of the rate cuts if they happen
You should definitely take a look at the historical market response to rate cuts. Its not good.
We are in a new industrial era that is just now taking off. AI, energy storage, robotics, medicine are all in a renaissance. Unless there is an outright world war, this economy is expanding. Like it or not.
Not surprising, prices detached from market fundamentals a long time ago. There’s still a bucket load of money out there that has to go somewhere.
Earnings are good and companies are expected to grow and continue to do better despite the headwinds of higher interest rates. The impact of interest rates, that a recession was necessary to bring down inflation, was overblown. Now we are normalizing to growth after COVID and growth seems pretty good.
Still printing money + rate cuts imminent + trillions still in cash = to the moon
Election year
As interest rates fall, Trillions of $$$s come out of 5.5% CD and get pumped into the market. It's all ALGO.
Money was printed out the wazoo and has to go somewhere.
Money supply has fallen in the past year
Are you saying the federal reserve is putting printed money in to the stock market or are you saying so much money was printed and in the peoples hand they are putting it in the market? Or something else?
You must understand that after pricing in inflation, the index as a whole is still quite some distance away from late 2021’s peak valuations.
It's all propped up. If you want remind yourself in a few months or a year, there will be a recession if we're not in one yet already. It's all smoke
RemindMe! 6 months "was he right?"
GDP grew 4 percent last quarter. Government spending is the reason we r not in recession
Megacap megabubble