Stock markets have disconnected from fundamentals (and reality). The economic fundamentals are almost as bad as they have ever been. Stock market valuations are as expensive as they have ever been. But that hasn't concerned markets for the past six weeks and, to be frank, it doesn't look like concerning markets any time soon. We discuss pertinent questions such as why has the market risen and what could bring the market back to reality
*Please note, this aired yesterday at noon, prior to the drop in markets
Join Nucleus Wealth's Head of Investments Damien Klassen, Chief Strategist David Llewellyn Smith, and Head of Operations Tim Fuller investigate "Markets disconnect from reality: what comes next?"
(Links are featured at the bottom right of the player if you wish to listen on your preferred platform). If you enjoy, consider subscribing on YouTube or your preferred podcast platform to ensure you don't miss future episodes
The stock market recovered because investors remembered the 2009 rebound, expected a V-shaped recovery and did not want to miss out on the V upswing. Perhaps they took the correct course.
Excellent, logical, well thought out argument. However, a similar case could have been made coming out of the GFC. Unfortunately two things occurred then that negated such reasoning. 1. The Fed chose to support and subsequently boost asset prices. 2. US Govt actions profited the rich (eg. handouts to the banks who had caused the problem in the first place) at the expense of the poor. This simply added to the generally acknowledged view that crises in general redistribute wealth from the poor to the rich. We are now in 2020. A different type of crisis this time, but the Fed has again 'chosen' (maybe don't have a choice anymore) to support asset prices at all costs. And there is a president (the other arms of govt are now just there for the show) whose sole understanding of the economy, indeed a major plank of his re-election campaign, is rising stock market indexes. It's fairly obvious that Corona economic costs are , like those of the GFC, going to fall on the poor . They don't have assets, so receive no benefit from fed policy and will suffer disproportionately from the cuts in services required to fund Trump's financial market assisting policies. US investors have quickly worked out who the beneficiaries will be and acted accordingly. To do otherwise would be placing undue faith in, "Things will be different his time". Wealthy Australians will also benefit, albeit muted by a less dovish central bank.