Offbeat Rapid recovery on the stock market after Corona - bubble or no bubble?

07:50  29 june  2020
07:50  29 june  2020 Source:   finanzen.net

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A stock market crash is what follows a stock market bubble . We apply the Minsky credit cycle model to the current economic and stock market environment and also look into the fundamentals of the market because a bubble is a bubble only when the market is detached from fundamentals.

It took about four months: First, to let the stock markets plummet from their all-time highs in record time, only to then make up for almost all losses within a few weeks - it is the next bubble to burst threatens?

SAEED KHAN/AFP/Getty Images © Provided by Finanz.net GmbH SAEED KHAN / AFP / Getty Images

• High ratings after a quick recovery - still no bubble?

• Senior Markets Commentator draws comparison to past bubbles

• Stock exchange phenomenon at a glance

The year 2020 was an exciting market from the start. Indices in high rush remained in their upward path and reached new record levels - at the end of the longest bull market in history. The conqueror of this historical phenomenon was the corona virus, which spread to a pandemic within a short period of time and almost forced the global economy to come to a standstill. However, as sharp as the decline on the stock markets was in the wake of the fleeing shareholders, the recovery also went quickly. This becomes clear at the latest with a look at the US technology exchange, where the

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When you put stock markets in a long-term perspective they don't look like a bubble . Individual stocks may rise quickly but that could be a sign that they have The reason that stock market returns can be higher than the growth of the economy over a long period of time is because many investors end up

The Federal Reserve does the stock market "no favors" by keeping interest rates low, according to one economist who says the market is on the brink of a bubble burst. Charles Dumas, chief economist at London-based Lombard Street Research, wrote in a recent note that the low cost of borrowing has

NASDAQ Composite

was successfully chasing records just a few days ago. price losses quickly recovered after Corona Almost all major stock indices such as the

Dow Jones

, the S&P 500 , but also the DAX and the SMI fell significantly back in the Corona crash quarter than the bears did Take control. After the longest bull market in history had pushed up most share prices significantly, many investors should have been motivated to make the best possible bargains on the stock exchange. This, coupled with the ever-emerging hope of easing the corona-related measures as well as interest rate cuts and the like, led to a supposedly rapid recovery of the battered stock markets. Although everyday trading is still relatively volatile, the distance to the corona lows has now grown again. Is that a reason for skepticism? There are different opinions on this. Did risky assets inflate the markets? Howard Marks, founder of the investment company Oaktree Capital, wrote in his recently published letter to investors about high-risk investments and was concerned. He suspected that "fundamentals and valuations" played only a minor role in the rally and threw terms like "buying panic" into the room. It can be assumed that the FOMO phenomenon ("Fear of missing out" - the fear of missing something) could have made a significant contribution. After the year-long bull market, investors may not want to have missed an opportunity that could contain "optimistic opportunities".

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Is this stock market a bubble ? Kevin and Tracey discuss it. Should You Be Buying the Hot Stocks Here? Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the U.S. Recovery Looks to Be Ebbing in States With Virus Outbreaks.

The ‘Everything Bubble ’ Market . For x % growth in stock market , The Fed Balance Sheet also grows x %. This means that the rise in stock market doesn’t reflect its fundamental values, but just a hype because of too much money flowing in the market because of the Fed’s QE (Quantitative Easing).

In an article on CNBC, the "Trading Nation" host and CNBC Senior Markets Commentator Michael Santoli wrote on the one hand that concerns like this were justified. Measured against the market-wide US index S&P 500, which has now narrowly approached its February highs, the prices of the stocks "economic realities" have rushed ahead - which could initially be indications of overvaluation or even a bubble. He continues to note that there have always been investors looking for quick money and therefore pursuing risky strategies, but the Fed's interest rate pledges and other fiscal measures have caused investors to be more courageous than in normal situations to let. On the other hand, Santoli also believed that the voices from investor professionals who commented on the recent trade boom were excessive and could prevent retail investors from entering the market at all. Stock market expert Jim Cramer also brought up the so-called "bubble callers" and accused them of bringing investors lessons from short-term losses.

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I usually consider stock market bubbles to be unnoticeable at first. Like a bubble in boiling water, the only signal you get about it getting burst is the small amount of sudden steam that floats up to your face before the hot water spurts onto your skin. Is the stock market on the verge of a boom?

The record-setting stock market is showing some signs of a bubble . Both the US and global economies are doing too well right now for the 8 First, as long term readers know, I rarely comment directly on the stock market (although I did post on the market in 2009 since that was a turning point).

Typical pattern for speculative bubbles

Of course, at first glance, the market recovery seems to be heading towards the formation of a speculative bubble. But which patterns apply exactly to bubbles? A look back into the past cannot be avoided: the most prominent is also the oldest example - the tulip bulb bubble, in which wild speculation of bulbs of the ornamental flower was speculated. But also in recent history there are prime examples of (ultimately always burst) bubbles, such as the dotcom bubble in 2000. Shares in Internet companies or corporations from the telecommunications industry literally caught fire. Typical characteristics are strong stock inflows without a valuation basis, high optimism for price increases, massive issuance of shares by companies.

He also notes that bubbles have been spoken too quickly since 2000. That was also the case at the beginning of the upward movement from 2003 to 2007 - wrongly, says the Senior Markets Commentator. Instead of an "echo internet bubble", the boom following the burst dotcom bubble could be defined much more as "continued growth of Web 2.0", he writes at CNBC.

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Business. Bubble or No Bubble ? Rob Hof. I've been thinking about the bubble question for awhile, and at least one person thinks the Web 2.0 crash is nigh. Extreme Behavior Is on Display Everywhere in the Stock Market May 19, 2020, 4:04 PM EDT.

A sudden and steep stock market correction can come at any time, and without any warning or obvious cause, according to Robert Shiller, Yale Only during the dotcom bubble did CAPE rise even higher. On the other hand, market guru Rob Arnott of Research Associates points out that CAPE has been

Current market situation different from past financial bubbles

Santoli characterizes this overall as a "New Era" delusion that fuels price dynamics. In his opinion, these factors are currently not to be found. He concludes that the feeling that the corona crisis has changed everything is omnipresent, but predominantly negative, and that skepticism among retail investors is therefore high.

In addition, the "Trading Nation" host sees the basic picture that prevails during a bubble, but does not fulfill it: A large number of doomed stocks after a "sky-is-the-limit" mentality led to unimagined heights. This picture is now emerging, instead investors would see themselves again in a situation in which they had nothing to lose. In doing so, they rely on companies in need before "assuming eternal and effortless growth." However, the short-term euphoric leaps that were triggered by drivers that have in the meantime been positive and that also entail corrections cannot be dismissed out of hand.

But the CNBC market expert emphasizes the difference between the current situation and past bubbles: One is a market that is priced in for long-term below-average returns and is put to the test by downward movements. The other is a real bubble that "distorts capital allocation and predicts profound losses for years to come."

It is clear that after the rapid recovery, traders have to adjust to setbacks and have to live with a volatile phase. Editorial office finanzen.net

Adam Silver defends NBA bubble amid Florida COVID-19 outbreak, says he won't be there the whole time .
The trajectory of the COVID-19 pandemic has shifted dramatically since the NBA announced its plan to run a bubble league at Disney World. Coronavirus cases have spiked across the country with Florida among the worst-hit states. Meanwhile, NBA players and team staff members are regularly testing positive for COVID-19, while other players are opting out of the bubble league entirely. Commissioner Adam Silver addressed those concerns in a Time 100 talk on Tuesday. He believes the plan for league’s return is sound and will be provide a safer environment for people inside the bubble than they would face in their daily lives.

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