I think you are 100% right about the 'new normal'. Outside of US domestic stimulus policy we are also looking at a global capital movement into the US, especially US equities so things like so p/e ratios, earnings, the US domestic economy etc are not really as much of a factor into valuations of stocks any more. Large institutional money, sovereign and pension funds need somewhere to park their capital. I am not talking about retail and mom and dad investors but the large money that moves indices. Where do they park the billions and trillions they collectively hold.
Europe and the Euro is in serious trouble so it's not there, emerging market debt is at record levels and many on the brink of default so not there, lots of question marks over China's reputation and relationship with the west so definitely not there. The Hong Kong golden days are over so capital is leaving HK at unprecedented speed. Their peg with the US dollar will likely break some time very soon. As all these problems around the world accelerate more and more capital will move into the US dollar and US equities. Simply as a place to park capital, noting more. Nothing to do with earnings. I mean just wait until the Euro officially falls, this is inevitable as they cannot continue running all of these different economies under one currency but not one bond market. If they consolidate their debts and create Euro bonds then they have a shot. Like the US did when they consolidated all the debts of their states and finally became 'United'. But good luck convincing the people of Germany and France to pay for the sins of the southern Euro states. Will likely never happen.
So with the world in trouble all of this large international money flows into the US - mainly US equities as the 'safest' place to park. Safest not as in safe but as the best out of many bad choices. The prettiest of three ugly sisters. I truly believe we are now witnessing the beginning of this trend which is why everyone is starting to scratch their heads as to the markets and earnings etc. all US analysts and news anchors only look at the domestic side of things and ignore the larger global picture - of course it is not making sense if you only look at a tiny part of the picture.
Those are my thoughts on the major macro 10-year picture trend in the long term but short term I still expect the first drop from Feb / March to fully play out completely. As history has shown with prior crashes the worst drop is about to happen before the dust completely settles on the 'Corona crash of 2020'. Look at all the charts of prior crashes and all you are seeing is human psychology at play. Unless humans have changed which I don't think we have. Like I have said in a previous post, not even betting on a second wave or any further trigger at all, the initial Corona market crash still needs to play out in full because of what has already happened with the first shut down, far from over yet. Not because of anything new.
I could be wrong in that the Feb / March drop is all we are going to get in terms of a drop but I highly doubt this. Whichever it is, my bet is that the crash will first play out in full (bull trap run collapse), will be short and severe in terms of US equities and then we'll see a prolonged mass migration of capital into the US markets from all around the world as it starts falling apart at the seams, which is already beginning to happen. This is not saying the economy will recover that quickly, it won't and it will be even more disconnected from the markets than now imo.
In the short term who knows how it will turn out but perhaps second drop / capitulation & new lows in the S&P / Dow from Jul or Aug and into the US election.. And then either a major slingshot move up on a Trump win in Nov or a deeper drop on loss and a much slower and gradual climb from there for the next cycle up.
Whichever it is we have some incredibly exciting and suspenseful months ahead of us. What a time to be alive and trading these markets
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