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Old 06-28-2017, 11:00 AM
 
Location: Olympus Mons, Mars
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If the economy is slow (GDP growth < 2%), middle class is hurting as claimed, debt is off the charts and there are so many challenges (healthcare, student loan crisis, immigration to name a few) why is the stock market making new historic highs every single day. Infact, today it is up almost 1% in just one single day!!! Many pundits are saying DOW 30,000 soon enough. At this rate it seems like DOW 100,000 very shortly if it keeps going up 1% every day or two LMAO!

I guess I am trying to find out what is the catalyst that investors are believing that valuations are warranted? Is it solely Trump's tax cuts for the rich? But if it was just that wasn't that rally already over? Why is it still rallying to new highs? What other news is coming out on a daily basis to go higher and higher?
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Old 06-28-2017, 11:12 AM
 
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Yesterday and today were due to ECB comments and associated breakdown and recovery in Euro/US dollar rate. Besides the ECB, other European central banks are pegging off of that exchange rate.
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Old 06-28-2017, 12:37 PM
 
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Due to a lot of things: I) CEO's renewed confidence in the support its getting from the White House---so they've been deploying more capital to PP&E and R&D, ii) earnings still growing at a respectable rate, iii) continued high employment and wage growth, and iv) investors continue to feel they will make more money in equities than bonds (you have to put your money somewhere).
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Old 06-28-2017, 01:00 PM
 
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The economy is growing slowly, but many companies have adapted and are turning strong profits. Household debt is not off the charts and is in fact less than it was before the Great Recession. Not everyone in the middle class is hurting. In fact the upper end of the middle class is doing better than ever with 60 million living in households with 6 figure incomes.


The stock market is not consistently growing 1% per day. There have been some ups and downs, some flat spots such as the end of 2015 and beginning of 2016, but overall growth has been pretty consistent with the stock market growing at 12% or so most years.
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Old 06-28-2017, 01:25 PM
 
Location: Nebraska
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A little perspective on the DOW, the DOW crossed 21,000 about Mar 1 2017 (4 months ago), it hasn't made any headway since. Most look at what the DOW has done in the last week or day and don't look at the history. So saying the DOW was skyrocketing is incorrect.

Back in 1999, I remember everyone so excited about 10,000 and all the news stories that there was nothing to stop it and the next stop was DOW 20,000 by the end of that year. Keep in mind that the DOW crossed 10,000 17 years ago.
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Old 06-28-2017, 03:03 PM
 
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Quote:
Originally Posted by Garthur View Post
A little perspective on the DOW, the DOW crossed 21,000 about Mar 1 2017 (4 months ago), it hasn't made any headway since. Most look at what the DOW has done in the last week or day and don't look at the history. So saying the DOW was skyrocketing is incorrect.

Back in 1999, I remember everyone so excited about 10,000 and all the news stories that there was nothing to stop it and the next stop was DOW 20,000 by the end of that year. Keep in mind that the DOW crossed 10,000 17 years ago.
Indeed. Examine a chart of the DOW (or your favorite index) over the course of centuries. Not weeks, months or even years, but centuries. What we've seen thus far in the 21st century is hardly impressive. By my own reasoning, 17 years is a mere blip, and one should not fret about long-term history, merely because the past 17 years have been lackluster in aggregate. Fine. But if we examine the last several months (say, since the November 2016 election) in light of the past 17 years, DOW-21,000 isnít shatteringly impressive.

At 7% CAGR (not counting dividends), the stock market should double roughly every decade. Well, letís go back 20 years, to 1997. In June 1997, the DOW was at around 8000. 20 years --> 4X, so today the DOW ought to have been at 32,000.

I agree, that below the upper quintile, the average man-on-the-street in America has not done as well, as has the stock market since its nadir in 2009. But the market is really only making up for lost ground. The real question is, will earnings be able to continue to grow sprightly?
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Old 06-28-2017, 03:40 PM
 
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17 years picks the top of a major financial bubble as a reference point.

1997 selects a period in the middle of the same bubble where central banking policy similar to today had just contributed to a doubling of the Dow within two years. If you back up the date two years, you get a much different result.

Anyone can pick any date to satisfy their own biases.
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Old 06-28-2017, 03:54 PM
 
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Originally Posted by k374 View Post
If the economy is slow (GDP growth < 2%) ... why is the stock market making new historic highs every single day...
This is completely normal. From 1930 to 2016, the average annual GDP growth is 2% while over the same time frame the average return of the stock market has been 7%.

Stocks aren't priced based on how much stuff they produce (GDP), they are priced based on profit and earnings. With automation and low labor costs companies have gotten really good at increasing earnings on what they produce.

Stocks have rallied since Trump's election because people are making bets that he's going to deliver large tax cuts for business. If he does that then that will goose earnings for most companies even though sales have not increased.
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Old 06-28-2017, 03:55 PM
 
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Originally Posted by lchoro View Post
Anyone can pick any date to satisfy their own biases.
Then why advance any opinion whatsoever?
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Old 06-28-2017, 06:44 PM
 
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Quote:
Originally Posted by Garthur View Post
A little perspective on the DOW, the DOW crossed 21,000 about Mar 1 2017 (4 months ago), it hasn't made any headway since. Most look at what the DOW has done in the last week or day and don't look at the history. So saying the DOW was skyrocketing is incorrect.
Perhaps not skyrocketing but significantly up from the 18K it was in October. The key point isn't that DOW is only 21500 now after hitting 21000 in March but that it's maintained that level. There hasn't been any significant pullback since Trump was elected.
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