Many people seem perplexed about this fact. Bad news should mean that the market should go down. Problem is, bad news means more action from the state/fed. One action is as we all know 0% interest rates. What return do you need to make a profit with 0% interest rates? Anything above 0.
This means that if you can borrow money at 0% and expect a return of 0,000001% you are making a profit. The Fed saying that they will do everything to get full emplyment back means that some investors see the doom and gloom headlines as a confirmation that the Fed will keep rates low. This signals that it’s worth borrowing money to put into the market, because any return above 0 is worth it.
The only question is how long this will last. My guess is when positive news starts taking the overhand, investors will scale back their risk. Simply because the 0% interest rate and state action is less likely to last as long the more positive the sentiment gets on the economy. Sentiment will be more positive in the news and stocks will be going down. People will say that it’s rigged – but it’s not. It’s just how the markets work, even if you hate it.
At least this is how I interpret the current situation and I am short on the market. Unless Fed and State turns positive in their sentiment, my investment is pretty much screwed. But I’m aware of this and I could of course be wrong.
No clue if anyone agrees with me on this, but this is what I think is happening currently.
Disclaimer: This information is only for educational purposes. Do not make any investment decisions based on the information in this article. Do you own due diligence.