Ghost of Igloi wrote:
Thurman wrote:
Earnings are through the roof with valuations declining.
None of that is organic growth. Government support for poor business models, corporate tax cuts, stock buybacks facilitated by Fed monetary policies, consumer spending supported by government handouts, unemployment and child care credits, student loan moratoriums, mortgage loan and rent moratoriums, PPP programs, support for travel industry debt, etc. The laundry list of unhinged policies goes well beyond a fiscally responsible society.
The expanse of magical thinking is so wide that even the smallest change to inputs topples this epic bubble. The key to watch is the behavior of mega cap growth stocks. The cracks in Ark Funds, meme stocks, crypto, SPACs, and IPOs are a forerunner of things to come.
Igy, this may have been a viable expectation at one time, but it became rather obvious at an early stage that the Fed and Central Bank were going to massively support the economy given the epic challenges that were brought on by the pandemic.
I think the difference is that some investors assessed the relevant dynamics at play and were able to trade the market accordingly.
Once could argue that those manipulations will have a long term detrimental effect on the economy and markets, and we can't rule that out, but we also cannot rule out that in the short term markets have doubled or more off the bottom, and a well-positioned investor would no doubt seek to participate.
That is just the assessment since the onset of the pandemic.
But considering the longer term projections for a massive correction, the narrative is similar: valuations are but one market force to be considered when assessing stock price at any given time in history.