The market is already pumped, pricing in a stimulus policy that is highly unlikely to arrive, or if it does arrive, it won't be sufficient to support a robust recovery that would justify current valuations (outside of tech companies dragging SPY up). Entirely possible we're at "the top", but there currently is no alternative to equities if you're chasing yield.
Is GDP really that far down? (and will it stay down without a stimulus package?) I'm not convinced the market really needs a recovery. Sure the majority of people need it but I'm not sure that has much of an effect on production, especially if cost of living is going to go down due to the bottom dropping out of the real estate market.
>especially if cost of living is going to go down due to the bottom dropping out of the real estate market.
This sure as heck isn't happening in my market... all year long I've listened to a group of potential buyers tell me they are going to wait because the bottom is going to fall out any day now ... every piece of data I have shows that the opposite is happening - we have more buyers than physical homes here and prices have been on a steady upward trajectory for the past five years. With interest rates at historic lows, there's no reason to believe buyers aren't going to continue to acquire homes.
Now - in other markets? Maybe there will be a correction, but that's actually bound to help my market and likely others too, as people move from expensive areas to less expensive areas. SFO / LA / PDX / SEA aren't going to collapse overnight.
In the case of institutional managers, they live and die by their returns. Take pension funds: if they do not meet their return targets, pensions get cut (or debt is issued to make up the gap, big yikes).
I agree with your last statement: the amount of risk isn't realizing a corresponding risk premium in the returns available. Yet, you must invest somewhere. That's your job (as an institutional investor). A lot of structural financial heartache ahead.
The present administration has gone to great lengths to prop the stock market up through any means necessary because the President makes no distinction between the market and the economy as a whole.
The present condition of the market is entirely artificial, and unrepresentative of the actual state of the economy. Thus, whenever the stock market is allowed to return to its natural level, it's going to take a bearish turn to surpass all others.
Even a government can't manipulate the market forever.
Congress doesn't seem too eager to pump the market right before election either.