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⏰ Time Stamps ⏰
1:27 Stocks overheated
2:06 Valuations don’t match economy
4:58 Problems for US businesses
8:20 What’s being done?
10:55 Impact on the stock market
15:00 Irrationality of the market
18:01 The house of cards
18:35 My take on the stock market
22:30 Final thoughts
🔖 Sources 🔖
► 36 million Americans unemployed: https://www.theguardian.com/business/2020/may/14/unemployment-us-data-coronavirus
► US household savings: https://www.cnbc.com/2018/09/27/heres-how-much-money-americans-have-in-savings-at-every-income-level.html
► Missed mortgage payments:https://www.wsj.com/articles/coronavirus-pandemic-fuels-rapid-increase-in-missed-mortgage-payments-11586815235
► Missed rent payments: https://www.newyorker.com/news/our-columnists/cancel-the-rent
► 63% of Americans: https://www.simplywise.com/blog/new-study-63-of-americans-will-need-another-stimulus-check-within-3-months/
► Consumer spending: https://www.bloomberg.com/news/features/2019-10-24/u-s-consumers-are-the-economy-s-best-hope-against-recession
► Economic data: https://www.aljazeera.com/ajimpact/evidence-mounting-facing-prolongued-recession-200515170458367.html
► 1800 page proposed bill: https://docs.house.gov/billsthisweek/20200511/BILLS-116hr6800ih.pdf
► Republicans support 2.0: https://www.fox23.com/news/trending/is-second-1200-stimulus-check-likely-when-would-it-come-what-happened-2000-proposal/DVLGIVG4VZEUZE3WLNZ3ITKETY/
► When vaccine? https://www.nytimes.com/interactive/2020/04/30/opinion/coronavirus-covid-vaccine.html
► Jay Powell & why he is snookered: https://news.sky.com/story/coronavirus-the-letter-u-is-helping-drive-stock-markets-down-heavily-11988367
📝 Overview 📝
The world is in the grips of a pandemic of the likes of which we have not seen in a hundred years. So, why is the stock market trading at similar levels to last year? It doesn’t make much sense and that inspired me to create this video and dive down the rabbit hole.
📈 Things Look Out of Step With The Economy 📈
With the US swamped by record unemployment, millions of US households skipping mortgage or rental payments and everyone being urged to stay at home, it is not surprising that people’s disposable incomes are dwindling. That’s bad news for businesses.
🏬 The Problem For US Businesses 🏬
Consumer spending makes up 70% of the US economy and the virus has crushed consumer spending. Total industrial production fell 11.2% in April. Factory output fell 13.7%. Retail and food service sales tanked 16.4% in April and is down 21.6% from the same period in 2019.
That’s all due to massive levels of unemployment due to lockdowns and the fact that many households had few, if no, savings at all before this all started.
💡 What’s Being Done? 💡
There are talks about yet another round of stimulus and freezing rent and mortgage payments for 12 months.
All this shows that many in political circles think the virus will be a problem for longer than we may think.
📊 Impact On The Stock Market 📊
In an efficient market, stock prices are driven by fundamentals like the earnings base and valuation multiples like P/E ratios. However, what we are seeing in the midst of record unemployment, corporate bankruptcies and profit warnings, is a stock market trading at around levels seen in 2019.
💰 Stock Valuations 💰
It appears that current stock market pricing is irrational. Yes, the market is dominated by institutional investors. However, history shows that this does not mean these institutions are always rational.
To add fuel to the fire, there appears to be widespread retail investor hysteria with huge rises in deposits on trading apps like Robinhood.
The truth is that the ‘stock market is not the economy’. It is driven by speculation and does not always price companies efficiently. I think that this surge in retail interest in stocks shows how irrational the stock market actually is right now.
🤙 My Call 🤙
In this video, I share my thoughts on when I think a stock market crash is going to happen and what I am doing to protect my own money. If you want more details on that, you’ll have to watch the video…
📜 Disclaimer 📜
The information contained herein is for informational purposes only. Nothing herein shall be construed to be financial legal or tax advice. The content of this video is solely the opinions of the speaker who is not a licensed financial advisor or registered investment advisor. Trading Forex, cryptocurrencies and CFDs poses considerable risk of loss. The speaker does not guarantee any particular outcome.
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