Stock valuations are justified because of our current situation

I keep reading online articles about the so called market crash and dotcom bubble will repeat itself and so on but a lot of people are not taking into account the amount of stimulus provided by the government is atleast 3 times larger than anything we’ve ever experienced, most businesses had to be artificially pump because of that stimulus relief, this crash was not caused by financial institutions it was an act of nature and the covid-19 crash was neccessary given that we had an almost 10 year bull market. Now I know the S&P 500 and the Nasdaq charts are beginning to look like a vertical line but it’s not like we will have a massive crash or whatever I think there will be some minor corrections but the reason the s&p and nasdaq are so high is mainly because of FAANG stocks, fintech and biotech stocks and those stocks increased because they all had record sales last year, Apple reach 100 billion in revenue for the first time, Amazon and other ecommerce sales literally had record breaking sales, Netflix subscribers reached and all time high, cashless payments also reached an all time high, biotech got the hype because of the virus, we entered a new transition where renewable energy is beginning to gain ground against oil, electric cars and driverless cars are becoming a norm so you can see that the stocks didn’t just fly for non reason even though the government helped by injecting cash into the market, these are just my thoughts please let me know what you think about the current market situation and if you think there will be a massive crash as most articles online are suggesting.

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You’ve also read the article on invest .com app news relating to Peter Kraus ,Wall street veteran! Yeah I suppose a correction could happen…
Is 10-15% a massive crash though? The S&p500 dropped 48% in 2008 and a mere 12.5% in March 2020. Set the alerts, set Stop losses, Short the indices when it does happen, and buy the dip!:money_mouth_face::rofl:!

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Well I don’t know about peter Krause or whatever article you’re talking about but my point is the recent rally in the S&P 500 and the Nasdaq are justified giving our current situation, I’ll not listen to people like bill ackman or other investors who claim the sky is falling on media but go behind and invest in the opposite direction. If there’s one thing I’ve learned so far is that never bet against the Fed.

But I have a question, according to your own personal observations about the current economic state in the west especially the US, what do you feel about the recent market rally and the supposed next market crash a lot of financial analysts keep talking about?

I don’t think Apple/Amazon having record sales matters when it comes to a potential crash.

The money is moving over to those stocks whilst the other Companies are struggling. The movement of money to the Hot Stocks is never a good sign as the Hot Stocks have to keep outperforming which will not last forever once we get out of this Covid Crisis.

I would look at the movement of which stocks are becoming overvalued to determine whether the Growth is natural as a Crash usually happens when those Hot Stocks of today start slowing down as money cannot be pumped into them forever and profits eventually slow and stagnate.

Biotech stocks will also suffer once the Virus is not a threat. The money will stop coming in for them once people understand that the innovations are not needed as much.

Well I respectfully disagree because record sales in the FAANG absolutely matters those companies have a combine market cap of more than 4 trillion dollars and they make up more than 13% market cap of the Nasdaq and when you add other large cap companies like Tesla, Walmart and a ton of large cap companies which had record sales last year, those companies alone move the index to record levels with or without government financial support, apple had more than 120 billion dollars in cash so I don’t think the government financial is the sole or main reason for the market rally, now there are a number of companies who are still doing terribly bad some went bankrupt and some are still recovering but they don’t have enough market cap of force to really affect the S&P or Nasdaq when big whales like Amazon, Apple, Google, Netflix, Tesla, Facebook etc are having record sales it will definitely counter those smaller companies now I’m not saying the market will fly forever there will be minor corrections but not a market crash and even when we get out of covid-19 I don’t think biotech stock will crumble because the hype will be over because this virus has shined a bright light on innovation in the medical sector in which companies are not only focusing on covid-19 but are taking on the challenge to be tackle diseases which have been dominating the human race for decades, thisbis the first time in history that a vaccine was created in less than a year trust me that’s a big deal because the average time to create an active vaccine is atleast 4 years but this crisis has triggered a massive tech and bio-tech challenge across the world, my next point is there’s no guarantee that after the virus we will return back to our past ways as a lot of people and businesses are already adsption to this virtual business model and it’s clearly benefiting businesses financially, new jobs based on this virtual business world are inevitably becoming a reality and they are here to stay, look at how fast the world accepted renewable energy in 2020, look at how fast people are shifting to cashless payments, look at how easy it is for the every day individual to access the financial market, look at how a subreddit made company gain more than 10 billions dollars of market cap in a matter of months so when you take all this changes into consideration you see that we’re in a new norm and even if the FAANG and other high market cap companies have a slow quarter or whatever the most that can happen is small market correction and we will resume the 8 to 10 years bull market as that is what has historically happened after every crash, even if these new hot stocks like Airbnb or what ever go bankrupt tomorrow while the FAANG are still doing well I seriously doubt that those smaller cap stocks will have a heavy impact on the market, I think a real crash might happen when the government begins to increase interest rates but if they do it slow and smooth everything will balance out.

not criticising your post or tone, but it’s rather hard on the eyes if you don’t break it up and it loads as a great wall. even just breaking it up into a few paragraphs would make it much easier for everyone who reads to follow and process what you are trying to say.

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FAANG is a misinterpretation of the American Economy though.

Facebook can only grow so much in the next 10 years as well as Netflix and Google.

Cashless payments is the future yes, but there is so much competition in that space and not all of it in the US.

Regardless of whether you think the US Economy will keep growing, the expectations that a handful of Companies will keep the whole Market Up is not realistic and will eventually Crash and correct as people realise that it is unsustainable to rely on a few sectors for sustainable Economy Growth.

Sure, Tech will always be needed but the Economy relies on many more Sectors that have had money taken out of them, that is not sustainable.

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Lol sorry about that

You should know by now that the stock market and the actual US economy are not always in correlation and yes the US depends on many sectors not just tech but that doesn’t change the fact that the tech and energy sector have a much larger contribution.

The service sector is the largest contributor to the US economic growth followed agriculture so I think it’s safe to say the fact that most of largest companies in the US fall under those sectors it’s a pretty safe bet and even if Facebook slows down there’re literally tons of social media companies like pinterest, Twitter etc. Which have tons of room to grow.

Another thing you mentioned there’s a lot of competition in cashless payment but you forget that the companies competing in America and all American companies that pay tax to the American government and employ American citizens so how does competition in cashless payment negatively affect it’s growth in the US?

Every world economy has many sectors that contribute to GDP but there’s always one main sectors that has the lion share and for the US it’s the service sector followed by agriculture same as how Saudi Arabia has other sectors that contribute to GDP but the energy sector has the lion share.

The whole world was hit hard by this and but the government has involed by lowering interest rates so a lot of business can get cheaper loans the government is giving out stimulus and so on which will definitely lead to higher inflation and a credit risk but that can still be countered if a "beautiful de-leveraging " as Ray Dalio explains in his video how the economic machine works, which will likely take places after this covid-19 dust has settle can help balance up the credit default risk if it comes to that and I’ve learned never to bet against the fed as I personally lost a lot last year when I thought the sky was falling because of all the media hype about a crash or collapse and whatever I came to realize that given our current situation the recent rally was warranted and a couple of small market corrections will takes place but the US which was among the few Developed nations to grow in GDP last year will definitely have a much higher growth rate this year and next year but that’s just what I think according to the DD I did but I get what you’re also trying to say.

I agree that long term the US Economy is going to do well and the FinTech sector in general (as well as FAANG) are the future for growth.

However, I also believe that the Economy is Overvalued and is purely propped up by the Stimulus, which is never spoken about. I do not disagree with most of your thoughts on the matter, but I do think the Market will correct or crash as too many Investors are using their Stimulus on Popular stocks due to FOMO. Best to protect yourself with other sectors in case it does happen.

I am hoping to get into Paychex once the reality of Smaller Businesses failing kicks in (as sad as that sounds as I don’t like hearing of job losses)

The US benefits from many FinTech companies as well as the Taxes it provides, but I do not believe the best ones will be in the US primarily.

You are right to not bet against the FED and it is sad that you lost a lot of money betting against them. You should follow what you think will protect your wealth.

The FTSE 100 is in the opposite situation where it relies too heavily on old Sectors which it should add more Tech into the sectors which is frustrating to buy Stocks in, but I do think that will change.

Honestly though, I don’t like how the FED are just printing money willy nilly as it will affect the Market and Economy in the long term.

I am glad you bring up points and disagree with how I see things. It lets me see how others thinj about the Economy and learn from the discussion. :slight_smile:

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Yeah definitely there will be some market corrections, well all we can is to hedge our investments and see how the future plays out, good talk :+1:t5: I definitely got somethings from the discussion that I’ll look into again.

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Likewise! Always good to have a discussion on where the Economy is going!

I hedged mine with Gold as I feel it will do well in a few years time. Perhaps too much as I paid like £9K last year. :laughing:

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Bro March 2020 was 34% … some of my cfd’s shed 60%.

15% should not phase you!

I stand corrected! I drew some figs.quickly from wiki! :wink:
Cheers AB