Starting from June 3 2020, US stock market has soared back to its 2020 high. Many stocks sky-rocketed even though their fundamentals didn't improve like airline, cruise ship, oil stocks. "Car renter Hertz Global Holdings Inc., oil driller Whiting Petroleum Corp. and retailer J.C. Penney Co. are among companies that have seen their shares more than double in recent trading sessions despite being in Chapter 11 bankruptcy".

Some of the rally in bankrupt shares might be attributable to short covering, when traders who have bet against a company close their positions by re-buying shares, lifting prices. But the rally could also be fueled by amateur traders, bored in lockdown and looking for a quick buck, using platforms such as Robinhood. The number of Robinhood users holding both Hertz and Whiting Petroleum shares surged after the companies filed for bankruptcy, according to Robintrack, a website unaffiliated with the stock trading platform that uses data to show trends.

On Apr 30 2020, Paul Krugman wrote "Crashing Economy, Rising Stocks: What’s Going On?" - The New York Times

What, after all, is the main alternative to investing in stocks? Buying bonds. Yet these days bonds offer incredibly low returns. The interest rate on 10-year U.S. government bonds is only 0.6 percent, down from more than 3 percent in late 2018. If you want bonds that are protected against future inflation, their yield is minus half a percent. > So buying stock in companies that are still profitable despite the Covid-19 recession looks pretty attractive.

But how do these retail traders have money to speculate on the stock market like this? I'm certain you already know how recessionary this 2020 pandemic is...I see news reports of food bank lines, 13.3% unemployment in May 2020, Black Lives Matter protests. CARES Act's $1200/mo. isn't enough!

“Retail has a lot to do with it and I don’t think you’ve seen institutional investors buying those kinds of stocks,” said Christopher Grisanti, chief equity strategist at MAI Capital Management. “It’s too much risk. I would call it catching a falling knife.”

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    $\begingroup$ This question contains embedded insults about investors, (“smart enough not to invest”) which helps ensure that answers will be rants, rather than technical economics. $\endgroup$ Jun 9 '20 at 11:23
  • $\begingroup$ @BrianRomanchuk i removed that phrase. better? how to improve pls? $\endgroup$
    – NNOX Apps
    Jun 9 '20 at 20:11
  • $\begingroup$ The unemployment rate is not 100%. People still have the ability to buy or sell stocks. $\endgroup$ Jun 9 '20 at 20:42
  • $\begingroup$ @BrianRomanchuk The unemployment rate is somewhat irrelevant. Even if it was 100% (or some very large number), some people would have savings that would last far longer than a year and hence can invest part of it. $\endgroup$
    – Giskard
    Jun 9 '20 at 23:34

You seem to be conflating wealth and income. If I am let go from my job, my work income is gone, but not my wealth or my capital income.

While most people only have a small amount of money saved (liquid savings, e.g., homeownership is not included), some have sizable savings. So do financial institutions. These actors will not want to spend all their wealth near term, so it makes perfect sense to invest part of it in assets that are expected to perform better than other assets.


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