> Right now the immediate job losses are all in the service sector and small employers, and those jobs are basically invisible to your typical trader bro.
Most of this activity is driven by robotic trades by institutional investors. It's largely quantitative. Whether the quantitative priors are accurate, is debatable.
I don't buy that. Objective quantitative analysis based on models that don't know about the pandemic should be pricing in a disastrous 30% unemployment, and clearly the market is not.
I'm not in the industry, but I have to believe the quants are doing what all of us are: they're throwing out the models, rewriting stuff where possible, but basically just guessing like the rest of us. And that process is a victim of their own subjectivity. And this is not just a demographic well-positioned to have a good, objective understanding of epidemiology.
Basically that's just a long winded way to say: wall street isn't looking at this correctly and is going to be surprised when quarterly results don't show the recovery they're expecting.
> Objective quantitative analysis based on models that don't know about the pandemic should be pricing in a disastrous 30% unemployment, and clearly the market is not.
That's not necessarily true. First of all, 30% unemployment, while a big scary unprecedented number, represents the expected outcome of the official policy of all governments (Federal & State) , which is forced unemployment. The CARES stimulus includes a $600/week unemployment insurance _on top of_ the existing state UI. In every state, the unemployment benefit is actually higher than the median wage [1]. Businesses know this, and proactively lay off / furlough their employees so that they may collect this benefit, with the intention of having them be first-in-line for re-hiring once this all passes. The other half of the CARES stimulus includes forgivable loans to businesses with the hope that those loans can keep businesses afloat so that they may be in a position to re-hire once this all passes. Put simply, because half the stimulus is in the form of direct insurance payments to people, and unemployment is the means of receiving that, you will see high unemployment numbers. Not only is this expected, it is intended.
All this being said, it's still not certain that many of these businesses will be able to survive even with the loans/stimulus, nobody knows for sure. The market doesn't price in the scary 30% unemployment number, it prices in the expectation that this number will fall back to usual levels by next year.
The grandparent comment asked why the Dow increased today, and it's because the Fed announced $2.3T in new small-business loans, which slightly increases the percentage of businesses that may be able to weather this storm.
Most of this activity is driven by robotic trades by institutional investors. It's largely quantitative. Whether the quantitative priors are accurate, is debatable.