The Resiliency Of The Stock Market (Radio Interview)

May 18, 2020

On the Trey Ware Show, Karl discussed how resilient the stock market has been and why this may be the case.


Trey Ware:                         652, Karl Eggerss, Joining us on the Stevens Roofing Newsmaker Hotline. Karl, last night on 60 Minutes, the Fed head Jerome Powell was speaking about the economy and opening back up and getting started. Your thoughts about where we are now based on what he had to say and others have been saying.

Karl Eggerss:                      Yeah, it’s going to take some time because not everybody’s open it up. The economy’s not going to move at the same pace in every location, but we are seeing progress. We’re seeing all kinds of data showing that we had the highest amount of TSA entry or TSA people going through TSA checkpoints in the US since I think it was March 23rd or 4th on the 4th, on Friday. You’re seeing some movement and you’re seeing peak day at the stock market and Wall Street anticipate that. It’s very interesting. The Dow futures right now are up almost 500 points because we are seeing another company with positive vaccine study results. And so there’s a lot of companies working on vaccines and it’s kind of a race to see who has the one, but there may be multiple companies. And that’s what Powell said last night.

He said, “Look, until we have a vaccine, people are still going to be concerned, which means the economy can’t get back to full strength.” But for our listeners, again, the stock market is very resilient right now. It’s amazing. We saw the worst retail sales drop ever reported on Friday, which makes sense. Everything’s shut down. And yet the stock market’s just ignoring that. And it’s because it’s looking forward to again, things opening up and getting a resumption of the economy. It may not get back to where it is for a while, which is what Powell said, but the trajectory and the again, acceleration going back into opening and having people start consuming again and free to do so, that’s what Wall Street is looking at. Is that this isn’t going to be a Great Depression. It’s going to start going the other direction now. It’s been a horrible recession, and a very violent one, probably the worst we’ve seen in our lifetime, worse than the great recession, but it’s going to be quick. That’s the difference. It’s going to be quick.

Trey Ware:                         Well, let me ask you more about the stock market then real quick here, before we have to jump off. I went up River Road on Saturday, rode the motorcycle there, just to look around and see what was going on. It was very, very busy up there in the New Braunfels area, as people are getting back home. But everybody was just in seeing, and you could tell you had a pile people there and a pile of people here. And so they were, the people that were there together, they were separating from other people and kind of minding their own business and staying away from everybody and doing the things that they knew they should do. I went to Whataburger yesterday and saw in line a couple of ladies driving their cars and they had gloves and masks on inside their cars by themselves. People have really bought off on the whole idea of all the PPE and doing all these things.

But back to the stock market for just a minute. With the stock market going up the way it has and returning the way that it has, of course it’s been up and down, but I read a deal last week where the people were saying, “Well, it’s really divorced from reality. The stock market is not living in reality right now.” What do you think about that? Is it or not?

Karl Eggerss:                      Well, it’s partially true because look, the economy is not where it was back in January, February, but neither is the stock market. But is the stock market expensive and is it moving at probably a different trajectory then the economy? Yes. But it always has. That’s the thing, it always has. It’s never moving the same as the economy. The economy is going to probably work its way higher and higher and higher and just take some time. We just, we know that. But the stock market’s just, it doesn’t work that way. It doesn’t work in real time. People buy stocks based on where they think they’re going to be in the future, where earnings are going to be in the future, not where they are today. And that’s probably the biggest misconception, Trey, is that when you read something on the news or hear something, you think the stock market should be moving based on that news.

And it’s not. Oftentimes it moves on something very, very different. Now we don’t even necessarily know about. It has a real uncanny way of thinking about and looking at the future. It does not look at old data and that’s why the retail sales we saw on Friday or the unemployment numbers we’ve even seen, Wall Street’s ignoring that because they know that that’s a temporary number that isn’t going to be sticky. That unemployment rate’s going to come down from what we see, because a lot of people are temporarily unemployed. We don’t know exactly what the number is going to be, but it’s going to come down. And that’s why you’re seeing the stock market not sitting on its lows, but rather somewhere in between the old highs and the old lows. Which makes sense to me, it shouldn’t be at its old highs right now, but it should also not be where it was on March 23rd.

Trey Ware:          All right, Karl Eggerss, Thank you, Karl, as always for your time. We’ll talk again next Monday.