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Nope, SP 500 is back to what it was in end or 2017 beginning of 2018 1. Do you really think the economy is as good as it is in 2018? 2. Do you think we are in

Nope, SP 500 is back to what it was in end or 2017 beginning of 2018 1. Do you really think the economy is as good as it is in 2018? 2. Do you think we are in the beginning, middle, or end of this outbreak? 3. Will the virus come back after this summer? This is the big question, and depending on this we either have just a deep but short recession, or an almost depression Answer those questions and you will know. My take: 1. I believe we are at the start of a deep recession. The market have been slow to respond/adjust (they haven't yet fully capitulated) 2. I think NYC is in the middle of the outbreak, while the rest of the country is in the beginning of the outbreak and they are just lagging by 2 weeks and things will get worse 3. This is unknown, but most scientist believe it will return as soon as the social distancing rules are eased. Best scenario is that when it returns, it is in low enough numbers that it could be contained in a way Taiwan/South Korea did (without shutting down the economy). The worst scenario is that it returns back full force, but mutated and more deadly....

chrischen 7y ago
I guess for #3, the hope is that once we've slowed it we can at least have prepared hospitals and PPE enough, and also that people will take it seriously and practice going outside and socializing safely.
01100011 7y ago
I think it would be much more interesting to have a HN discussion thread on where the economy may be heading. Sure, it depends on the virus, but we can probably come up with a few scenarios covering likely outcomes. Personally, I think the fundamentals are not looking good, as you mention. I'm guessing we're going to finally see the inflation everyone has been expecting since QE#1/2008. We just pumped the monetary supply yet half the country seems to be stagnant. Goods aren't being made, warehouses are being depleted. I think we're in store for shortages and price hikes on labor intensive goods. The strength of the dollar will likely depend on how we fare relative to other countries. Now, assuming inflation, I would expect some hikes in asset prices(not adjusted for inflation of course), but I don't know what the timing of that would be. Maybe it takes a few quarters for higher prices to translate to higher stock prices? Also, I would think that having unemployment in the 10-40% range would severely reduce retirement contributions and equity purchases by individuals, although I don't know if that is enough to matter relative to the big players like hedge funds and pension plans(and the fed, who might start buying equities for some reason).
arriu 7y ago
If things keep going at the rate they are right now, the market will need to acknowledge that there is a massive pile of bodies by May 1st* There are two more questions to ask, is this already priced into the current market? And, will our social distancing be enough to change our current trajectory? *Source: https://i.imgur.com/YznALHZ.png https://i.imgur.com/YznALHZ.png
- alexpetralia 7y ago
  This looks fairly dire, but I do wonder to what extent it may be overfitting? After all the model was created yesterday.
- Fnoord 7y ago
  What is the formula/model used?
throw0101a 7y ago
> 1. Do you really think the economy is as good as it is in 2018? By trying to miss the worst days one generally also misses the best days: * https://theirrelevantinvestor.com/2019/02/08/miss-the-worst-days-miss-the-best-days/ https://theirrelevantinvestor.com/2019/02/08/miss-the-worst-... * https://www.cnbc.com/2020/03/07/when-you-sell-during-a-panic-you-may-miss-the-markets-best-days.html https://www.cnbc.com/2020/03/07/when-you-sell-during-a-panic... * https://seekingalpha.com/article/4297557 https://seekingalpha.com/article/4297557 Buy a little every month, rebalance once your asset allocation is more than 5% out-of-whack, and increase bond holdings as you approach your target date.
wycy 7y ago
This is exactly my take as well. I'm shocked the market hasn't tanked much more. I would think that anyone should prefer the economy of 2018, 2017, 2016, 2015, 2014...as compared to projections of unemployment as high as 30% and the economy in total gridlock. Yet the Dow/S&P don't reflect that yet.
- hanoz 7y ago
  But don't forget that the unit of measurement for the Dow and S&P is not what it was in 2014 either.

chrischen 7y ago

I guess for #3, the hope is that once we've slowed it we can at least have prepared hospitals and PPE enough, and also that people will take it seriously and practice going outside and socializing safely.

01100011 7y ago

I think it would be much more interesting to have a HN discussion thread on where the economy may be heading. Sure, it depends on the virus, but we can probably come up with a few scenarios covering likely outcomes. Personally, I think the fundamentals are not looking good, as you mention. I'm guessing we're going to finally see the inflation everyone has been expecting since QE#1/2008. We just pumped the monetary supply yet half the country seems to be stagnant. Goods aren't being made, warehouses are being depleted. I think we're in store for shortages and price hikes on labor intensive goods. The strength of the dollar will likely depend on how we fare relative to other countries. Now, assuming inflation, I would expect some hikes in asset prices(not adjusted for inflation of course), but I don't know what the timing of that would be. Maybe it takes a few quarters for higher prices to translate to higher stock prices? Also, I would think that having unemployment in the 10-40% range would severely reduce retirement contributions and equity purchases by individuals, although I don't know if that is enough to matter relative to the big players like hedge funds and pension plans(and the fed, who might start buying equities for some reason).

arriu 7y ago

If things keep going at the rate they are right now, the market will need to acknowledge that there is a massive pile of bodies by May 1st* There are two more questions to ask, is this already priced into the current market? And, will our social distancing be enough to change our current trajectory? *Source: https://i.imgur.com/YznALHZ.png https://i.imgur.com/YznALHZ.png

alexpetralia 7y ago
This looks fairly dire, but I do wonder to what extent it may be overfitting? After all the model was created yesterday.
Fnoord 7y ago
What is the formula/model used?

throw0101a 7y ago

> 1. Do you really think the economy is as good as it is in 2018? By trying to miss the worst days one generally also misses the best days: * https://theirrelevantinvestor.com/2019/02/08/miss-the-worst-days-miss-the-best-days/ https://theirrelevantinvestor.com/2019/02/08/miss-the-worst-... * https://www.cnbc.com/2020/03/07/when-you-sell-during-a-panic-you-may-miss-the-markets-best-days.html https://www.cnbc.com/2020/03/07/when-you-sell-during-a-panic... * https://seekingalpha.com/article/4297557 https://seekingalpha.com/article/4297557 Buy a little every month, rebalance once your asset allocation is more than 5% out-of-whack, and increase bond holdings as you approach your target date.

wycy 7y ago

This is exactly my take as well. I'm shocked the market hasn't tanked much more. I would think that anyone should prefer the economy of 2018, 2017, 2016, 2015, 2014...as compared to projections of unemployment as high as 30% and the economy in total gridlock. Yet the Dow/S&P don't reflect that yet.

hanoz 7y ago
But don't forget that the unit of measurement for the Dow and S&P is not what it was in 2014 either.