I can make a case that we were in an 11 year super bull and a 20-30% decline was just a normal occurrence . The world stopped and debt levels have exploded $5-$10 trillion and tons of Bk's to come yet the mkt's back to levels of last sept like nothing happened leaves one speechless .This has no bearing on my trading but i'm fascinated how easily anything bad is discarded and has been for decades . I really thought this time the piper would finally be paid and it still might be but its looking like the lows of 2176 will be super hard to hit
My guess is that the rally isn't because traders feel the economy is great, its because inflation will hit, and therefore, valuations will have to adjust. I think we are past the point of no returns with regards to giving out free money. It will continue, and the debt will be inflated away. With so many people unemployed, and soon to be more I'm sure when business realize that even after opening, they can't function under the new rules, governments will go the Universal Basic Income route even faster. In other words, free money isn't stopping. This means more money printing, etc.
My theory is that at this point, it is all about the USD.........15 years ago, if you would have told me that the Fed would be printing this much money & the US govt would be running 5% budget deficits, I would have guessed that EUR/USD would be trading at 2.25, Gold would be at $3,000, and US 10 year yields would be north of 8%. Yet here we are.....I expect this fiscal/monetary insanity to continue and get worse until the rest of the world screams out ENOUGH, and decides to do something to upend the USDs status as global reserve currency. If that moment happens, things will quickly adjust to reality, and the US will likely default on it's obligations. But if that moment never comes, then I expect things get to get much more insane over the next 10 years both monetarily and fiscally in the United States.
Anyone could call this rally. It's not that hard to see. Fed is still in QE infinity which means cheap money for banks to lend to companies in distress. Analysts are discounting poor performance as coronavirus (a binary "one time" event) so no one is selling on bad news. Moreover, the Trump pump is still alive and well and every time he brow beats governors over not opening back up the market rallies on the hope they will. The market is high on hopium. The fall will be glorious. When atlas (the fed) drops the market flat on it's face when it ends QE infinity a 50% drop will likely look like a normal day at the office. Keep in mind the fed has a very good reason for pumping the market. The nearest retiring generation (the boomers) have their retirements tied up in index pegged 401ks and pensions. The country would suffer greatly if these people were forced to either stay in the labor pool longer or get on social programs. The economy isn't great. In fact I'd bet we are already in a depression (a GDP drop of 10%). The market indices no longer represent the overall health of the economy. We're navel gazing about the market like it's any different than watching the number history at a roulette table.
When thinking about markets, you must always ask yourself: "where is the path of pain?" That is not to say where you think the market should be. Who among us can consistently and truly time macro markets ? {before you start spewing forth about Buffett et al, just don't}
I agree, however if somebody want to make waves in the pot, I have to make my realistically not to pessimistic point
Why? Because the rest of the world is in such great shape? Your comments reflect things as if Europe, Japan, China, etc...all are on sustained paths of fiscal responsibility.
We still need to be careful with that line of thought. Knowing things are not great while the markets move back upwards and cause a lot of pain on Short positions...helping to push it a little higher until it rolls over again. Gotta have deep pockets, insurance and a horny spouse to help ride out the unlimited printing of money to keep this upwards. wrbtrader