Quoted from iceman44:
The Fed pumping trillions of dollars into "the market" causes assets to re-price. "Don't fight the fed" as they say. Happens every time. The enormity of the dollars is unprecedented. S&P is at 23 p/e right now and it's meaningless.
FORWARD looking 2021 earnings are being priced in at 18x according to Fundstrat. That's meaningful and relatively cheap given current conditions.
Given where interest rates are, monetary policy is and fiscal stimulus 20x is "fair value" for the broad market based on 2022 predictions of $200 to $220 per share and certainly not a ridiculous number. That puts the S&P 500 at 4,000 in a year. Food for thought.
Investors are anticipating that the 2nd quarter is going to be the trough and the 3rd quarter will post some of the biggest numbers in history due to the restart.
This rally is going to continue because of all of the above, with bumps in the road. Fear and panic is subsiding despite media attempts to keep it alive, the world is re-opening and there WILL be a vaccine and therapeutics. And the "second wave" is another fear tactic that will NOT shut down the economy if it were to happen to any degree.
Another prelude today of what's coming with Novavax positive trial info this time.
"Bottoms up" individual stock investing is my preferred method and NOT index or "market" investing.
See above statement again.
The "S&P 500 market" is a tale of many different markets. Why would i buy the whole market? I'd have to own Netflix AND AMC theatres, airlines and other industries i don't want to own. Or short it? Want to get trampled by TTD, SHOP, AAPL, AMZN and other "new economy" stocks etc?
Growth and momentum was in the back seat and flat today. My preference under the current political, tax, monetary and fiscal environment. P/e's will always seem high, and deservedly so in some cases.
We will look back on this time 6 months from now and say, how did i miss out on CCL at $14 per share, up 12.5% today, DIS when it's back at $150 per share. Hilton, Marriott, BKNG etc. etc. etc. Some of these stocks have already had massive rebounds and some will have longer recoveries but the excellent businesses will get to the Destination if they can survive the journey and it will be at much higher prices.
The VIX is at 28, it hit 85 in March. Not going back there.
The funny thing is, "the market" is not worried about China yet! If there were no pandemic for the media to bang 24/7 then i suspect we'd see the VIX pop on China trade and cold war fears.
Plus, "the market" is pricing in virtually ZERO election risk right now and making the calculus that independents and more moderate blue's will be able to discern the differences going on right now with Red versus Blue re-openings. That a BIG part of the calculus right now subject to shifting.
Anyhow, that's my take at the moment.
I'll be looking to rebalance a portion of the portfolio from growth/momentum to "in the ditch" very soon.
Can't wait until the positive news happens and gets confirmed in July, August and September, too late then to catch the coming tsunami.
I don't doubt that there's going to be a vaccine early next year (by the time it can actually be produced, evidently they are way short on vials and production won't be instant), in fact I would be stunned if there wasn't. I just don't see how we get from 38.6 million unemployment claims to 'best 3rd quarter ever' in one month, because that's essentially what would have to happen in order for that to come true. Plus the US sells a lot around the world (and depends on things from around the world) which would make it really hard to come back that fast, even if people wanted to spend the money. I can't even buy simple things like 3d printer filament currently, supply chain is still hosed. I think the 3rd quarter is going to be better than the 2nd but still kind of rough. With that high of unemployment, you have a high percentage of people who can't buy cars, houses, vacations, etc.
Hotels and airlines, I think airlines will eventually recover in a smaller state, hotels there was already overbuilding going on and now business travel is probably going to be greatly reduced going forward. Probably add massive debt (at low rates) to their balance sheets too making it harder on profits moving forward. Same goes for Boeing, will eventually recover but the debt will drag on their earnings.
I would agree that there won't be a second shutdown no matter how bad it gets. I wouldn't rule out 4000 by 2022 either, that seems plausible with all the money flying around. To get there though, I would think that the consumer would need to recover at some point. 8.1% of homeowners are currently in forbearance, and the commercial real estate market is going to hurt bank lending for a while.