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Exciting New Territory for the S&P 500

Interesting concept:
It seems in this exciting new territory for the S&P 500, stock prices are reacting more to changes in the expected rate of growth of the Fed's balance sheet than they are to changes in the expected rate of growth of the S&P 500's underlying dividends per share.

How long that might last is anyone's guess. The only thing we know for certain is that eventually, all periods of relative order, disorder, disruptive events, or bubbles in the stock market come to an end. It's only ever a question of when.
order-disorder-disruptive-events

Comments

  • SP index analyst Howard Silverblatt on 2nd quarter S&P 500 earnings:

    "For Q2 2020, 313 issues have reported, as estimates for Q2 2020 have been reduced 47.9% since the start of the year, which explains why 257 issues, an astonishing 82.1% of the issues, have beaten them (the historical average is 67%). "

    Estimates are way easier to beat when you lower them by nearly half, notes John Waggoner. BTW, the S&P500 increased 5.51% (5.64 with dividends), and the three-month period return was up 12.23% (12.87% w dividends).
  • edited August 2
    Yes. That is an interesting concept. Relatedly, it might also be helpful to link the current bubble to the ballooning federal deficit created by the stimulus programs (which will only balloon further if Biden's proposed New Deal era style programs begin to happen next year). And, linking the bubble to the Feds commitment to keep interest rates near zero further into the future than the stock market looks ahead (TINA) probably also makes sense.
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