Some have been listening to the story about how this is a great chance to own American companies for cheap but we need to take a look at whether Stocks are actually cheap. The economic collapse is so severe it has taken a major chunk out of the forward earning projections meaning Stocks have actually become more overvalued following stock market crash 2020. The issue is we were already in an earnings recession previous to this and now almost all economic activity has come to a halt and no one is really sure where earnings will land following this collapse. The mortgage industry is also teetering as millions have lost their jobs and are forbearing their mortgage payments at least until things settle down. The majority of this country was living paycheck to paycheck even during the "Greatest economy ever" what are people going to do now that they lost their jobs. We are looking at a situation where 30% of mortgages are predicted to enter default as mortgage lenders plea for a bailout due to the forbearance program. At this point, a drop in home prices and stock prices could actually prove to be a healthy turn of events since most of the country doesn't have income. The continuation of this bubble keeps most assets out of reach for the common man. Another concerning fact is the main buyer of US equities has been the corporations themselves and since many will be accepting the Loans from the bailout they will not be able to do stock buybacks, many have already halted buybacks due to the volatility in the markets. The tide is moving out and be careful not to confuse a bounce with a recovery.
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Some have been listening to the story about how this is a great chance to own American companies for cheap but we need to take a look at whether Stocks are actually cheap. The economic collapse is so severe it has taken a major chunk out of the forward earning projections meaning Stocks have actually become more overvalued following stock market crash 2020. The issue is we were already in an earnings recession previous to this and now almost all economic activity has come to a halt and no one is really sure where earnings will land following this collapse. The mortgage industry is also teetering as millions have lost their jobs and are forbearing their mortgage payments at least until things settle down. The majority of this country was living paycheck to paycheck even during the "Greatest economy ever" what are people going to do now that they lost their jobs. We are looking at a situation where 30% of mortgages are predicted to enter default as mortgage lenders plea for a bailout due to the forbearance program. At this point, a drop in home prices and stock prices could actually prove to be a healthy turn of events since most of the country doesn't have income. The continuation of this bubble keeps most assets out of reach for the common man. Another concerning fact is the main buyer of US equities has been the corporations themselves and since many will be accepting the Loans from the bailout they will not be able to do stock buybacks, many have already halted buybacks due to the volatility in the markets. The tide is moving out and be careful not to confuse a bounce with a recovery.
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