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re: Why is the stock market rallying right now?
Posted on 2/27/24 at 8:30 am to LaBornNRaised
Posted on 2/27/24 at 8:30 am to LaBornNRaised
quote:
while most stocks are down over 50%
The Mag 7 is responsible for ~30% of the S&P's growth. This is an incredibly small amount of companies (1.6%) responsible for a vastly disparate amount of growth (and, as such, should be looked at as more of a potential bubble than a permanent fixture), but basic math says that "most stocks" can't possibly be down 50% with the overall market as high as it is even removing that marginal growth.
The S&P is currently at $5,069.53, a year ago it was at $3,982.24. That's $1,087.29 in growth over the last year. Thirty percent of that (Mag 7's contribution) is $326.187. That means without the Mag 7, the market would likely be somewhere around $4,743.34 which would put it at nearly the highest amount (it got only a few points higher toward the end of December 2021).
Posted on 2/27/24 at 8:44 am to Bard
quote:
The S&P is currently at $5,069.53, a year ago it was at $3,982.24. That's $1,087.29 in growth over the last year. Thirty percent of that (Mag 7's contribution) is $326.187. That means without the Mag 7, the market would likely be somewhere around $4,743.34 which would put it at nearly the highest amount (it got only a few points higher toward the end of December 2021).
But but but X said……
Posted on 2/27/24 at 8:53 am to JohnnyKilroy
quote:
But but but X said……
This is where I think many have problems. I try to go off the old Reagan saw of "trust, but verify" whereas it seems many just want to trust whatever matches their beliefs and/or biases. Speaking of which, I think it's almost time for the annual meeting of the Secret Societal Overlord Lizard People (SSLOP).
This post was edited on 2/27/24 at 9:31 am
Posted on 2/27/24 at 9:06 am to Lsut81
quote:
Nonetheless, I don't understand the stock market, which is why I don't day trade
That’s got to be the reason.
Posted on 2/27/24 at 9:10 am to cajuntiger1010
quote:
travel is expensive etc.
I travel about once a month and the current price levels aren’t affecting travel volume. Seats on planes, seats in restaurants, and hotel rooms are competitive to find even in the more expensive market categories.
Posted on 2/27/24 at 10:19 am to Motownsix
quote:
seats in restaurants
I can tell you for sure that the restaurant industry is hurting right now, especially the higher end restaurants along the gulf coast. It’s trickled down to distributors as well
Posted on 2/27/24 at 12:07 pm to Bard
quote:Agree with your basic math comment, but I thought this an interesting comparison regarding a small amount of companies responsible for a disparate amount of growth.
This is an incredibly small amount of companies (1.6%) responsible for a vastly disparate amount of growth (and, as such, should be looked at as more of a potential bubble than a permanent fixture)
Are other countries running stock markets with evenly-distributed results, or are they top-heavy as well as the USA? They're top-heavy. Here's a comparison, based on MSCI country stock market ETFs, and using the S&P 500 via SPY for the United States:
quote:
Top 10 Holdings Market Concentration (%):
66 Italy
58 France
58 Germany
56 Brazil
49 UK
43 Canada
42 China
31 USA via SPY
26 Japan
America is closer to the less concentrated end than the most.
Posted on 2/27/24 at 12:59 pm to hall59tiger
The restaurants might be struggling on margins/profitability, but they seem quite full. The consumer is still pretty solid.
Posted on 2/27/24 at 4:49 pm to slackster
Growth rates are YoY. Keep in mind the 2022 recession.
Posted on 2/27/24 at 6:02 pm to RoyalWe
quote:
America is closer to the less concentrated end than the most.
Agreed, but there's a vast difference in scope. At a recent ETF conference, Dimensional Fund Advisors mentioned that the Mag 7 stocks are now just as large as the entire stock markets of Japan, UK, Canada, France, Hong Kong/China combined (17% vs 17.5%).
The old saying about how "if the US economy sneezes the rest of the world catches a cold" comes to mind. If we are in a consumer debt bubble (like I believe we are) and it pops, that's going to be a helluva sneeze.
Posted on 2/27/24 at 7:35 pm to Bard
quote:
If we are in a consumer debt bubble (like I believe we are) and it pops, that's going to be a helluva sneeze.
Maybe. I’ve read a lot of your posts on here and you seem to discount debt servicing as a whole compared to previous cycles. While I appreciate CC debt is high and expensive, total debt service is near long term lows …
I realize real wages are down, but not enough to swing that to a level that is remotely approaching GFC level.
Posted on 2/27/24 at 9:00 pm to slackster
quote:
Maybe. I’ve read a lot of your posts on here and you seem to discount debt servicing as a whole compared to previous cycles. While I appreciate CC debt is high and expensive, total debt service is near long term lows …
I realize real wages are down, but not enough to swing that to a level that is remotely approaching GFC level.
Yeah, I was looking at that earlier today. I don't mean to discount it, but it's so incongruous with the increase in consumer debt, the interest rates, delinquencies and the lethargic movement of real wages that I'm just not sure what to make of it. That uncertainty increases when we take the rise in GDP and slowly draining personal savings into account.
If those stats were reversed I would say consumers were focusing heavily on fiscal responsibility (and we would likely see the GDP suffer because of it), but this? Within the context of everything else I have to wonder if it has something to do with how they calculate it (including nonprofits, for instance).
So I dug into it a little tonight since I had some time...
The formula used is (series FA154104023 (debt service payments) / series FA156012005 (disposable income)) * 100. If we look at the amounts of those two series we see a constant climb in both debt servicing payments and disposable income going back to Q1 2022.
Here's what those numbers look like as a percent change from quarter to quarter.
While we see the rate of growth in debt servicing drop we see the rate of growth of disposable income drop even more. If we take that into context with slowly dropping personal savings and rising credit card delinquencies, I have to wonder if that stat isn't telling us that consumers are at the beginning of starting to walk away from at least some of their debt in lieu of continuing to spend from the credit still available to them (and supplementing that with savings) as their disposable income shrinks?
If a debt simply isn't serviced, does it count in that chart?
This post was edited on 2/27/24 at 9:02 pm
Posted on 2/28/24 at 5:25 am to slackster
quote:
The restaurants might be struggling on margins/profitability, but they seem quite full. The consumer is still pretty solid.
That’s not true at the higher end restaurants. The people I’ve talked to say that they think people are still going out to eat but they are just choosing to go to cheaper options. I think that’s a reality across multiple industries. Regardless of what the market is doing there are tons of people being squeezed right now.
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