Why have stock prices gone up 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 markets in general, has increased significantly! Although some claim, or indeed believe, this indicates the strength of the economy in general, it is important to recognize that there is often little or no relationship between stock prices and the health of the economy (and its relatives). impacts, on every day, people)! With that in mind, this article will briefly attempt to consider, examine, review and discuss 5 factors that could be contributing to what we have witnessed.

1. Low yields: With record low interest rates and correspondingly 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 sort of return. While, for those, borrowing money, low rates are desirable, for those seeking returns, it is not! In addition, it makes it easier to borrow funds, on margin, and creates greater demand for (and often a corresponding increase in prices for) shares.

two. 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 seems to be that it favored the wealthiest people and the largest corporations, efficiently! This led to higher corporate profits, because they paid less taxes. Doesn’t it make sense, would it create, rising share prices?

3.The business benefits: 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 rise!

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 trading/traders, and online trading programs, which allow more people to participate, has created more demand, and that often leads to rising prices.

5. Greed: As we saw recently, when some took advantage of the internet to create a market, for lesser quality stocks, using some of the behaviors/actions of hedge funds, against them (or, in their interest), this greed and speculation have created higher prices, in some cases.

There are many factors involved in 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?

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