Stocks booming because with lockdowns people are just putting their money into investments?

[jcc]

I've been struggling with the fact that since the whole corona thing got started, while real world economies are not doing well, stock markets have seen some pretty explosive growth. The returns have been good along the board, every index.

Why? Well, for a while I thought "perhaps it's on expactations post- recovery". But the corona slump was insignificant, and we've gone way up past that.

Eventually I've come to a simpler theory I'd like to know others thoughts on: with people stuck at home with nothing to spend their money on(eating out, shopping etc), they have money burning a hole in their pocket, and thus have more money to invest. More money to invest->more demand for stocks, but supply is about the same so we get the current rise.

What will happen once things return to normal though? I'm not sure. One line of thought is people just leave that money in there for their retirements. Another is that without a continuing stream of money in(demand returning to normal), growth slows down, and people unsatisfied with the returns decide to get out. How far this drops is an unknown.

What to do? Well, I'm doing nothing but I'm mentally preparing myself to resist the urge to sell and to just keep buying in. I've been having trouble keeping my regular buying going lately as I see prices go higher and higher. I just had to buy a big chunk of bonds to rebalance my portfolio, which seemed like a waste(because the returns have been poor), but I'm hoping that does its job in stabilizing my portfolio if/when a selloff occurs post-corona.

Just wanted to get that out of my system and see what others think about this current state of things and how they're dealing with staying the course.

Thoughts?

[RetireJapan]

Just keep swimming. I have another 2-3 decades before I need to think about selling anything. Max out iDeCo/NISA, put money into eMaxis Slim every month, buy dividend stocks when I have some spare cash. Repeat.

[adamu]

Hey jcc, nice to see you posting here. It's been a while.

I'll just leave this here.
https://twitter.com/TikTokInvestors/sta ... 3598558213

I think you're probably right. But, I know nothing. So probably best to just stay the course, and weather the storm if/when it comes.

[jcc]

Hey jcc, nice to see you posting here. It's been a while.

Yeah, when you have a simple plan and stick to it you kind of run out of things to say about it and just run it on autopilot I actually think that's part of the reason that indexing buy and hold/rebalance strategies don't get talked about that much... they're boring and there's not much you can write about them(unlike speculating on specific stocks etc)

I still check in from time to time but haven't had much to add so I've kept quiet haha.

I'll just leave this here.
https://twitter.com/TikTokInvestors/sta ... 3598558213

It's funny because my feeling now that I "know" is that I'm scared of buying when things are going up like they are haha. Of course I still do it, otherwise I'd be timing the market(and potentially missing more continued growth), but it's kind of hard!

[AreTheyTheLemmings?]

From another thread:

I think one factor is the tidal wave of money governments have unleashed as part of their quantitative easing policies in reaction to various crises over the past decade or so (the GFC, Covid-19, etc.). All that cash has to go somewhere, so a lot of it ends up in stock markets where it keeps prices afloat despite whatever carnage is happening at the time.

[adamu]

A couple of bloomberg articles about this. No good answers.

https://www.bloomberg.com/news/articles ... volatility

https://www.bloomberg.com/news/newslett ... t-your-day

[Ax6isB]

Just last week I listened to an interview with a man in the US who was in his early 20s and using Robinhood for trading. While he does some research in conventional ways, he’s also glued to resources like TikTok traders mentioned above or ZipTrader who has 350K Youtube subscribers(!). Apparently this guy and his buddies listed to posts, chat up trading ideas and go at it. Is it material enough to move the markets? I don’t know but probably for some stocks. 350k people acting on trading ideas is a lot and there are probably other evangelists on youtube. It was a very interesting interview.

Early in the pandemic we had BarStool Dave turn to trading as sports betting ceased as there were no sports. Did that money go back to sports betting now that sports have restarted?

In 2008, we had saw some crazy behavior leading up to the crash with people investing with the Fear Of Missing Out.

Like others say, staying the course is good advice but also figure out how much of a drawdown you can stomach and afford in the near term. It could be time to take some earnings off the table, or pause on incremental investing for a period. Having a little free cash on hand when a drawdown occurs is nice. Recently, I’ve done some selling where I’ve had large run ups and for new positions I’m starting with a smaller amount.

[robster]

It's funny because my feeling now that I "know" is that I'm scared of buying when things are going up like they are haha. Of course I still do it, otherwise I'd be timing the market(and potentially missing more continued growth), but it's kind of hard!
[/quote]

I second that feeling ...and curious to know how others are dealing with this. I understand the theory that you should not try to time the market and just keep investing according to your plan, regardless of market movements. BUT ... when everything you are invested in is at the highest point it has ever been, it's very hard to convince yourself to buy. I guess in the end it's a personal choice : stick to the plan, make use of DCA, or sit tight for a while hoping for a correction to come soon. I would welcome any sage advice, or just examples of what other members are doing in regard to this.

[adamu]

when everything you are invested in is at the highest point it has ever been, it's very hard to convince yourself to buy.

Maybe this will help

https://awealthofcommonsense.com/2014/0 ... ket-timer/

[RetireJapan]

I would welcome any sage advice, or just examples of what other members are doing in regard to this.

I spent years waiting for last March's crash, had millions set aside to buy and was desperate to do so... but we needed the money to keep my wife's business afloat. Funny how economic crises have consequences, eh?

We pretty much stick to the plan. People have been saying we're in a bubble since 2012, and anyone who sat out since then is never getting back in. Just carry on buying things every month.