Why have stock prices risen so much?: 5 factors
Despite more than a year since the start of the first cases of this horrible pandemic, and the impact on general economic conditions, especially in terms of employment, business closures and other factors, the price of many stocks , and related stock exchanges in general, has risen significantly! Although some claim, or indeed believe, this indicates the strength of the overall economy, it is important to recognize that there is often little or no relationship between stock prices and the health of the economy (and its impacts, in every day, people)! With that in mind, this article will attempt to briefly consider, examine, review and discuss 5 factors that could contribute to what we have witnessed.
one. Low yields: With record low interest rates and the corresponding low rate of return (dividends and/or interest) on bank deposits, US Treasury vehicles, and corporate and municipal bonds, stocks benefit because there are far fewer options. , in terms of where you can invest and get some kind of return. While for those borrowing money, low rates are desirable, for those looking for yield, it is not! In addition, it makes it easier to borrow funds, on margin, and creates more demand (and often a corresponding increase in prices) for shares.
2. Tax Reform 2017: Although President Trump and the Republicans, pushing harder for this legislation, claimed that it would primarily benefit the working class, the real impact appears to be that it favored the wealthiest people and the largest corporations – efficiently! This led to higher corporate profits, because they paid less tax. Doesn’t it make sense, would it create, rising stock prices?
3.Business benefits: The corporations of many corporations increased significantly due to the above, two factors! When investors consider, price – earnings, gold, PHYSICAL EDUCATION ratios, this makes the shares of many companies go up!
Four. Increase number/ percentage of investors: Statistically, more people are involved in investing in stocks today than in the past. The combination of the use of mutual funds, hedge funds, day trades/traders and online trading programs, which allow more people to participate, has created more demand and that often leads to higher prices.
5. Greed: As we saw recently, when some took advantage of the internet to create a market, for lower quality stocks, using some of the behaviors/stocks of hedge funds, against them (or, in their interest), this was greed and speculation. They have created higher prices, in some cases.
There are many factors associated with rising stock prices, but it would be wise to realize that investing in stocks (no matter how big, one’s strategy, etc.) is never guaranteed. Will you commit to being a smart investor?