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The S&P 500 index earnings yield in recent years has been about 5% per year. Even if we assume economic output drops by 80% and stays at that level for one year before recovery, that's only a 4% (lost earnings)/(price) ratio, so why did the market go down by over 4%?
The S&P 500 index earnings yield in recent years has been about 5% per year. Even if we assume economic output drops by 80% and stays at that level for one year before recovery, that's only a 4% (lost earnings)/(price) ratio, so why did the market go down by over 4%?
Profits and gains are not linked
in the book a random walk down wall street 548 NYSE issues were tracked and analyzed over 5 year periods and the results were the performance had no relationship between the technical and fundamental signals and the actual stock performance ..
ned davis research took another look at the relationship and going as far back as 1927 they found when profits rose more than:
20% the s&p returned a mere 1.3% in gains
10 to 20% saw 5.8% in gains
(-10% to + 10% in profits saw a 9.3% jump in gains
Because stock indexes are, more than anything else, a barometer of the financial future, and are driven by the spastic and unpredictable reactions of a herd of chronic nail-biters.
The way I see it is that there's too much uncertainty. We are doing a lousy job of containing the virus spread, have indecisive leadership, and we're not sure how the structure of the economy is going to look and function after this virus has passed us.
You can make bets, and I certainly will when the risk:reward looks a little more favorable. I'll be looking at the Russell Index the quarter after the virus abates, but right now there's safety in big value names with small business getting absolutely slaughtered right now.
The S&P 500 index earnings yield in recent years has been about 5% per year. Even if we assume economic output drops by 80% and stays at that level for one year before recovery, that's only a 4% (lost earnings)/(price) ratio, so why did the market go down by over 4%?
Why......lol. Because market was in a BUBBLE, that’s why. Why do you think market deflated so quick??? Remember all those STOCK BUYBACKS you all were supporting and cheering about?
Why......lol. Because market was in a BUBBLE, that’s why. Why do you think market deflated so quick??? Remember all those STOCK BUYBACKS you all were supporting and cheering about?
Good Luck!
I bet those zenith workers here wished their company did more buy backs ...a foreign company was able to buy up enough stock to take them over , fire everyone here and just use the name brand labeling overseas .
Had zenith bought back enough stock they would still be here ...this is a story that repeats over and over .
In 1998 there were over 7500 stocks in the Wiltshire ..today there are about 3450 ..... the rest were taken over , acquired or taken private equity , or went bust.. they lost control of their own destiny
The real question should be: why hasn't it dropped more?
FED's job since 1987 has been to protect stocks. They have not given up, I think.
Good Luck!
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