Why Is The Stock Market Doing So Well?
U.S. stock futures are up today, a day after the stock market closed at record highs. Given the still sluggish economy, why is the stock market doing so well?
- Marty Schenker, executive editor at Bloomberg. He tweets @mschenker.
MEGHNA CHAKRABARTI, HOST:
It's HERE AND NOW. I'm Meghna Chakrabarti, in for Robin Young. When the fed speaks in its oracular tones, markets listen as they did yesterday when the Dow and S&P 500 hit record highs following Fed Chief Ben Bernanke's announcement that he would keep interest rates low. Marty Schenker of Bloomberg News joins us now with more. And, Marty, first of all, why did the markets react this way because it doesn't seem like low rates are anything new to me.
MARTY SCHENKER: They're actually not, Meghna. They're not new to me and they're not new to Ben Bernanke. But he - it's oftentimes market psychology that drives share prices. And actually, Ben Bernanke said pretty much the exact same thing three weeks ago and that sent the markets down. So now, he's reiterating they're keeping stimulus going and they're going to keep interest rates low, and the markets just took off.
CHAKRABARTI: OK, so they took off. But let's talk a little bit about who the winners and losers are in the market these days, I mean, with its performance as it's been. Let's start with the losers. Who are they?
SCHENKER: Well, actually, the cover of Bloomberg Businessweek this week is all about one of the major losers, and that's hedge funds. Those are these big pools of money that are assembled by portfolio managers who make bets on behalf of wealthy individuals. And they have been the big losers in this market rally. They have, basically, took a very bearish stance on stocks after the market crash of 2008 and have never really recovered. Their returns are much worse than the markets in general.
CHAKRABARTI: So sad times for the ultra rich who love to short things. But what about...
SCHENKER: Yes, that's very sad.
CHAKRABARTI: What about the little guys? How are they doing?
SCHENKER: Well, you know, it depends on what kind of strategies they took. Most professional financial managers will tell you pick a strategy and stick with it. So if you are invested, say, in 2008, in equities, in stocks and you basically didn't panic and stayed with it, you got every - all of these record gain since then. But anybody who basically panicked and pulled their money out of stocks is sort of out of luck.
CHAKRABARTI: Now what about individuals who have to invest on their own? How they fared?
SCHENKER: Well, it depends again how they - what kind of philosophy they took. If they basic - and what - how old they were. And if you tailored your investment to when you're going to need that cash to retire, then they probably did pretty well because whilst stocks have good records, we recently had one of the biggest rallies and bonds in history. So while a lot of people were invested in bond funds, those people did very well, too ,over the last five years.
CHAKRABARTI: OK. So, Marty, what do you think? I mean, we're in a bull market now. How long do you think it can last? Will these bulls ever going to get tired?
SCHENKER: Well, bulls eventually do get tired. And that is actually a very big debate going on right now, since this rally is getting pretty long - since 2008. That's quite a long time for a bull market. But there are some - and some people say you better get set up for an end to this bull. But then, there are other investors like Laszlo Birinyi who think - and he's one of the preeminent investors of our age. And he thinks there's still room to run.
CHAKRABARTI: All right, well, Marty Schenker of Bloomberg News. Thanks as always for joining us.
SCHENKER: My pleasure. Transcript provided by NPR, Copyright NPR.