The Investment Thread
I know that and sentiment is why I am currently making returns in a down market. Negative sentiment because we just crossed a $5 a gallon nation wide average on gas(and many more but that one stares us in the face daily). Plus after today we are now officially in a bear market.
I just find it interesting people want to place blame for the recession at the feet of corporate greed as some kind of scapegoat(and this does not mean some are not blameless). It's not better than people who blame presidents exclusively how the economy is performing. It takes a comedy of bad actors to make an economy tank(which I addressed in an earlier post).
You can't simply blame this on one single thing. But to try and omit one of those factors(or many) because it fits your own perceived biases is only going to hurt you in the long run.
Right, but you asked the question why stocks are going down if profits are increasing. The stock market is not a direct reflection of the economy. In the short term it's a reflection of what people think is going to happen to the economy in the near term. So, corporate profits are still very healthy, but the fear is that the fed is going to over tighten and cause a recession, which will hurt corporate profits. It doesn't mean they're right, but when you have a market that has been over inflated for a very long time, it doesn't take much to get them spooked.
We also aren't in a recession -- yet. We might not get into a recession, although the odds of that are pretty good. But I do agree, that there are lots of factors that go into the economy. The president probably has some of the least direct influence, since none of the president's executive powers deal directly with the economy. Fiscal policy resides with Congress and from the government side of things.. the President obviously influences congress somewhat, but he can't pass bills unilaterally. Executive order has some influence, but presidential power is somewhat limited there (although there has definitely been a very long creep since Teddy Roosevelt).
As far as corporate greed, I agree that anger is somewhat misplaced -- in terms of moral outrage. A company's job is to make money. That's it's primary responsibility. Getting mad at them for trying to maximize profit is like getting mad at a tiger for eating a cute fluffy animal. To that end though, there is a far bit of evidence from corporate statements and reporting that they are raising prices faster than their costs to maximize profit. That is what they are incentivized to do in the short term. It certainly isn't the only contributor to inflation (and probably isn't even the main contributor), but it is definitely happening. I don't think there is a lot that can be done about that except to make sure there's plenty of competition, which will keep companies somewhat in check.