Date : 22 March 2021
FAST FOWARD & FED'S PUSH
The continuing strength of the stock market even as the coronavirus pandemic batters the US economy has baffled many observers. The Dow Jones Industrial Index (DJI) fell some 30% in the first three weeks of March 2020 as COVID-19 began spreading rapidly globally, but it has since gained nearly 60% to current levels above 28,650. Meanwhile, the U.S. economy shrank 31.7% in the April-June quarter. Now after Trump lose his Presidential Election 2020. The Dow Jones Industrial Index keep rising 40.5% and hit highest levels 33,227.78.
The first, which is true of all times, the stock market is meant to be forward-looking. In general, the stock market is a bit different from the economy, in the sense that what you see right now in the economy is what is going on right now such as production, employment and so forth. Even in “normal times" stock prices and economic output would not move in tandem. In fact, may have situations where the stock prices may predict something that is going to be different from what we see right now.
Secondly, the Federal Reserve has put a lot of money into the market, and that certainly helps keep prices up, maybe above what we would expect without this intervention.
The fact that the Fed started injecting all this money into the market pushed prices up. The prices of assets are mechanically pushed up by the Fed’s act of purchasing them. That causes prices for other assets also to rise because investors are always looking for places to put their money.
RECOVERY ECONOMY 2021
The pace of the economic recovery in the US in 2021 hinges on the pace of COVID-19 vaccinations. It projects that doubling the number of vaccine doses administered daily to 3 million would create more than 2 million jobs and boost real GDP by about 1% over the summer of 2021, with smaller effects later in the year. Since the first vaccine dose was administered on December 14, around 50 million Americans have been at least partly vaccinated, it estimated.
At the current pace of around 1.5 million doses per day, we can expects economic recovery to continue but proceed gradually through the middle of year, with employment rising to nearly 152 million in July and four-quarter real GDP growth of around 5% in the third quarter. Averaging over the full year of 2021.
By the end of the 2021, about 80% of the population will have immunity to COVID-19, either from vaccination or from having been previously infected. Vaccinations alone would have covered between 50% and 60% of the population in that time frame. So no matter what, we are looking at a substantial improvement relative to where we were last year, and there is just not going to be as much scope for the virus to spread going forward, even in the relatively pessimistic scenarios.
"The vaccine is truly incredible. It is the best kind of stimulus we could want" - Kim
Much of that is contingent on people feeling comfortable in getting vaccinated. One factor that we don’t deal with explicitly is that people have to believe in the vaccine. Even though there is a fair amount of skepticism right now, I think that once people see it, that they are going to realize what a wonderful thing it actually is.
I am expecting very rapid growth in the economy in the second and third quarters of this year. No matter what, we are headed towards a substantial recovery, but as we show just exactly how sharp that recovery looks is going to depend on how quickly we can ramp up the vaccination delivery.
Boosted by the global vaccine rollout, gradual reopenings and US government stimulus, can be expects global GDP to grow by 5.6 percent this year, and continue the recovery with 4.0 percent growth in 2022. A high degree of uncertainty remains, however, as new virus mutations could spark another wave of infections during the vaccination campaign or even prove resistant to the vaccines currently deployed.
As the following chart shows, it can be expects global economic output to return to pre-pandemic, example Q4 2019 levels in the first half of this year, with the further growth trajectory depending on the speed of the vaccine rollout among other factors. The top policy priority is to ensure that all resources necessary are used to produce and fully deploy vaccinations as quickly as possible throughout the world, by adding that the resources required to provide vaccines to lower income countries are small compared with the gains from a stronger and faster global economic recovery.
BONDS AFFECT THE STOCK MARKET
Bonds affect the stock market by competing with stocks for investors' dollars. Bonds are safer than stocks, but they offer a lower return. As a result, when stocks go up in value, bonds go down.
Stocks do well when the economy is booming. When consumers are making more purchases, companies receive higher earnings thanks to higher demand and investors feel confident. One of the best ways to beat inflation is to sell bonds and buy stocks when the economy is doing well. When the economy slows, consumers buy less, corporate profits fall, and stock prices decline. That is when investors prefer the regular interest payments guaranteed by bonds.
The Federal Reserve controls interest rates through its open market operations. When the Fed wants interest rates to fall, it buys US Treasurys. That is the same as increasing demand for the nation's bonds, which makes their values rise. As with all bonds, when the value rises, interest rates fall.
Lower interest rates put upward pressure on stock prices for two reasons. First, bond buyers receive a lower interest rate and less return on their investments. It forces them to consider buying higher risk stocks to get a better return.
Second, lower interest rates make borrowing less expensive. It helps companies who want to expand. It assists homebuyers to afford larger houses. It also helps consumers who desire cars, furniture, and more education. As a result, low interest rates boost economic growth. They lead to higher corporate earnings and higher stock prices.
So what happening now, more rising bond yields more chance investor buy beaten tech stocks. As long no continous fiscal stimulus, risk of outbreak inflation is low. Is it now "Correction phase"? I dont say its correction, it hit by bond yields actually. So by rising yields and the prospect of inflation hurts growth stocks like tech companies. It's growth stocks companies because they reduce the value of profits promised to far out in future, compare to others part in market.
MY FIVE (5) STOCKS FOR TIME-FRAME 1-3 MONTHS
FYI, I have 10 stocks list for 2021 for invest. Herewith part of them (5) which you can see as below with my Target Price and another Five (5) will release soon :-
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