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How The Heck Are My Index Funds Up When the World is Burning?

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    How The Heck Are My Index Funds Up When the World is Burning?

    So, my Vanguard S&P 500 is up by something like 13.1% since I bought the shares.

    I know that Fed asset acqusition is playing a huge role in keeping the markets up, but earnings are going to be terrible this quarter. These higher asset prices make no logical sense from an economic fundamentals standpoint.

    Plus, we're looking at:

    1. Additional coronavirus economic impacts
    2. Social unrest
    3. Uncertainty due to the upcoming presidential election

    It just blows my mind that the market isn't flat or even down a little bit.

    Economic & policy fundamentals right now:

    Last edited by james.hendrickson; 07-10-2020, 09:42 AM.
    james.c.hendrickson@gmail.com
    202.468.6043

    #2
    This question has come up repeatedly. There's no simple answer, and a lot of folks believe that the current market performance is insane and a crash is coming, and they might be right. Others, however, point out that the market is forward-looking. Performance isn't based on what happened last week or last quarter but on what investors expect to happen 3 or 6 or 9 months from now and a lot apparently still expect to see a recovery.

    I don't have the answer any more than anyone else. I think your 3rd point becomes more and more important as November 3 approaches. And this year the uncertainty is likely to be even higher because due to COVID concerns, there should be a record number of votes cast by mail so there's a very good chance we won't have the results on November 4. It may take several days to a week before we know who won (unless it's a blowout). That just lends even more uncertainty.
    Steve

    * Despite the high cost of living, it remains very popular.
    * Why should I pay for my daughter's education when she already knows everything?
    * There are no shortcuts to anywhere worth going.

    Comment


      #3
      Definitely strange and trying times.
      I'm still looking forward about 20 years with my investments, so I'll just sit back and keep dollar cost averaging.

      Brian

      Comment


        #4
        I posted this before but it has the answers to everything

        Comment


          #5
          The same reason the cost of a barrel of oil has absolutely no impact on gasoline prices at the pump.

          Comment


            #6
            Originally posted by rennigade View Post
            The same reason the cost of a barrel of oil has absolutely no impact on gasoline prices at the pump.
            Really? Then why does the price of gas change daily as the price of a barrel goes up and down? I've always found the two to be pretty closely linked.
            Steve

            * Despite the high cost of living, it remains very popular.
            * Why should I pay for my daughter's education when she already knows everything?
            * There are no shortcuts to anywhere worth going.

            Comment


              #7
              Originally posted by disneysteve View Post

              Really? Then why does the price of gas change daily as the price of a barrel goes up and down? I've always found the two to be pretty closely linked.
              Perhaps when price went negative, Rennigade was pissed that WaWa's didn't pay him to fill up.

              Comment


                #8
                Stocks = economy. But the better question is are people really sure about the economy? Do we really know unemployment and jobs? Or are we being super positive and guessing?
                LivingAlmostLarge Blog

                Comment


                  #9
                  Originally posted by disneysteve View Post
                  Really? Then why does the price of gas change daily as the price of a barrel goes up and down? I've always found the two to be pretty closely linked.
                  There is 100% a linkage between auto-gas & crude oil prices... but it's just not a direct correlation. Just like any other consumer product, as raw material costs (crude) go up, the end product (mogas) eventually goes up as well. Costs, availability, distance, etc. of refinement, transportation, and a variety of other factors (none of which are linearly related) all add into gas prices. All of that means that you can often see crude prices go down, while gas prices may go up (or the opposite). Though I'll acknowledge that saying "zero impact" is a bit of a leap.
                  "Praestantia per minutus" ... "Acta non verba"

                  Comment


                    #10
                    Everything isn't burning. Some sectors are doing quite well because of (not in spite of) Covid-19. Why wouldn't the stock prices of those sectors be up?

                    Comment


                      #11
                      Originally posted by Petunia 100 View Post
                      Everything isn't burning. Some sectors are doing quite well because of (not in spite of) Covid-19. Why wouldn't the stock prices of those sectors be up?
                      Yup, things that are burning are burning to the ground. Big money is funneling into sectors that are not affected by Covid, or are making more money thanks to Covid. I feel almost bad owning SHOP since it drops every time there are GOOD news about a vaccine or treatment, and explode higher as Covid cases become out of control.

                      Comment


                        #12
                        well you guys keep asking the same question and the answer is the same. market is forward looking, not all companies are doing poorly, components that are doing well are the largest component of the indexes, etc. Look at the top components of the s&p500 and the % weighting. Almost all the top 10 holdings are doing well and stand to exit the crisis even more dominant; their performance offsets weakness in other sectors impacted by the virus. They're almost all up 50-100% over the 52 week lows. Covid is accelerating a shift already happening towards online services and products, both professionally and at the retail level. It really isn't hard to understand.

                        Top 10 Holdings (26.86% of Total Assets)

                        Get Quotes for Top Holdings
                        Microsoft Corp MSFT 6.00%
                        Apple Inc AAPL 5.78%
                        Amazon.com Inc AMZN 4.49%
                        Facebook Inc A FB 2.12%
                        Alphabet Inc A GOOGL 1.65%
                        Alphabet Inc Class C GOOG 1.61%
                        Johnson & Johnson JNJ 1.44%
                        Berkshire Hathaway Inc Class B BRK.B 1.35%
                        Visa Inc Class A V 1.27%
                        Procter & Gamble Co PG 1.15%

                        MSFT 213.67 -0.65 -0.30% USD 4:00PM EDT 26.178M - 36.186M 1.62T
                        AAPL 383.68 +0.95 +0.25% USD 4:00PM EDT 21.827M - 35.299M 1.663T
                        AMZN 3,200.00 +17.37 +0.55% USD 4:00PM EDT 5.486M - 4.847M 1.596T
                        FB 245.07 +0.57 +0.23% USD 4:00PM EDT 22.983M - 25.884M 699.19B
                        GOOGL 1,539.01 +20.35 +1.34% USD 4:00PM EDT 1.796M - 2.048M 1.048T
                        GOOG 1,541.74 +30.75 +2.04% USD 4:00PM EDT 1.857M - 1.784M 1.055T
                        JNJ 142.37 -0.12 -0.08% USD 4:00PM EDT 4.138M - 7.957M 375.337B
                        BRK.B - - - - - - - - -
                        V 192.55 +0.34 +0.18% USD 4:00PM EDT 7.339M - 9.591M 422.953B
                        PG 123.89 +1.41 +1.15% USD 4:02PM EDT 5.896M - 8.539M 306.707B
                        Portfolio News

                        Last edited by ~bs; 07-11-2020, 06:02 AM.

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                          #13
                          The Fed's zero interest rate policy is also a factor, driving some investors to the stock market. Reminds me of a border collie herding sheep.

                          Comment


                            #14
                            Originally posted by scfr View Post
                            The Fed's zero interest rate policy is also a factor, driving some investors to the stock market. Reminds me of a border collie herding sheep.
                            Yup. It's making it so there's no other options to put your money. That combined with quantitative easing spending and propping up the market, no matter what. TRILLIONS of dollars in stimulus didn't hurt either. boosted unemployment means that many are making more unemployed than employed. I also think people like james might be confused thinking that the weighting of indexes and funds tend to be more equal. It's not 100% divided by 500, it's weighted heavily towards giants that are eating up more and more market share as a result of the virus. I wouldn't doubt that over half of the companies are doing worse now due to the virus and stock prices dropped accordingly. But that's not how the market is calculated.

                            Comment


                              #15
                              I heard the other day that there is $5T sitting in money market accounts right now. And U.S. corporations are sitting on record amounts of cash. And the U.S. individual savings rates are at all time highs. There is a lot of cash sitting around waiting for something. Or is cash a good investment? Typically, it isn't. I like the Callan periodic table of investments. Diversification is good.

                              Comment

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