So the equity market is ALWAYS forward looking....

S

S2007S

In most articles I read, especially today all I hear is that markets are ALWAYS forward looking....


Thats all I hear day in and day out day after day, month after month ...that the market is forward looking. But what makes absolutely zero sense is the fact that how come literally 998899% of the time the forward looking narrative is ALWAYS ALWAYS Positive and never ever ever NEGATIVE????



From the article:

“The market is a forward looking mechanism. They see six months from now, nine months from now there will be more semblance of order. The economy will be coming back, and earnings will be coming back. Estimates have stopped going down,” said Steven DeSanctis, Jefferies equity strategist. “You have the full support of the Fed ... the flows into credit markets have been incredible. The capital markets are open. IPOs and secondary offerings are getting done.”





https://www.cnbc.com/2020/06/02/why...-even-with-massive-unrest-across-america.html
 
It's a no-win narrative perpetuated by "professionals"... The little guy can not time the market but we can, so give us your money.

The narrative has not been true for any of the historic bear markets. Just as example, 07-08.

This one will be no different... the Trillions in US stimulus is a drop in the bucket on the International scale of the damage that has been done. But for the moment, everyone is looking past, but that is merely looking at the immediate expected benefit. You'll see...

Here's a small sampling of what is on the horizon... https://www.arabianbusiness.com/ban...wer-bills-indicates-omans-finances-tightening

The Trillions in US stimulus is a drop in the bucket on the International scale of the damage that has been done.
 
For overall market, this will be the case for as long as earth's population is growing. Most retirement accounts are on auto-pilot and they look years/decades into the future. Don't fight the sperm!
 

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No, the stockmarket waits on your trading wisdom before it moves. Stockmarket cannot move without you telling where it is supposed to go.
 
S2007S said:
Thats all I hear day in and day out day after day, month after month ...that the market is forward looking. But what makes absolutely zero sense is the fact that how come literally 998899% of the time the forward looking narrative is ALWAYS ALWAYS Positive and never ever ever NEGATIVE????
More...


At least in theory this is correct. Stocks are the discounted expected future cash flows of a company to investors. You're buying a piece of a company ostensibly to profit in dividends and/or increase in book value.

So why are the forecasts always positive? I think Joel Greenblatt hit the nail on the head in his book You Can Be A Stock Market Genius, which I'll paraphrase here:

Analysts have a number of competing interests:

1. Deliver quick timely reports on companies they cover. This necessarily means they cannot really dig into more than a handful of companies (bias = positive because when you need to guess its a safe guess).

2. Deliver politically relevant analyses on their covered companies. If you're an analyst at a major investment firm, your firm likely does some form of business with the companies it covers. It pays dividends to paint these companies in a positive light so that they continue to to do business with you. (bias = positive).

Both of these things represent a positive bias. This is why unless the company is an absolute dog analyst reports are almost universally skewed positive.


Moreover, there's a macro-level reason for this. A SWAG on how many people index in their retirements and pensions is probably 40-50%. There's a vested interest in keeping these people happy and buying index funds. As a result news articles will generally spin positive because the alternative is people watching their retirements evaporate. The average person does not have the trader instinct to sit on a loser and will start closing out positions. Pension fund managers will pull millions out of your index tracking fund if it begins to underperform.


The conclusion is that the reason you notice this is political despite the reality being largely different.
 
Just imagine this scenario....

The economy slowly reopens and by late summer things are picking up faster and better than previously expected....

Then you couple this, with a Federal Reserve that is more accommodative than at any point in US history....

And then, for the cherry on top, you now have an investor herd that saw stocks go up despite living through a pandemic, massive civil unrest, and a full economic shutdown for 3 months....you will literally now have an investing world that believes that stocks cannot go down, that the Fed truly has made stock markets risk free.

How do you think the investing community would behave with such newfound confidence in the Central Bank's ability to eliminate risk?.....my guess would be a parabolic upside move like we haven't seen in a very long time.

Perhaps....just perhaps....the market is sniffing out that very scenario right now. Just perhaps.
 
SteveM said:
How do you think the investing community would behave with such newfound confidence in the Central Bank's ability to eliminate risk?.....my guess would be a parabolic

How about hyperinflation as the reason for markets going up? Idiots are still whining about deflation.
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Bingo!


SteveM said:
you will literally now have an investing world that believes that stocks cannot go down, that the Fed truly has made stock markets risk free.

How do you think the investing community would behave with such newfound confidence in the Central Bank's ability to eliminate risk?.....my guess would be a parabolic upside move like we haven't seen in a very long time.

Perhaps....just perhaps....the market is sniffing out that very scenario right now. Just perhaps.
More...
 
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