Why have stock prices gone up so much: 5 factors
Despite, more than a year, since the beginning of the first cases, of this horrible pandemic and the impact on general economic conditions, especially in terms of employment, business closings and other factors, the price of many shares. , and related stock exchanges, in general, has risen significantly! Although some claim, or actually believe that this indicates the strength of the overall economy, it is important to recognize that there is often little or no relationship between share prices and the health of the economy (and its impacts). , in every day, people)! With that in mind, this article will briefly attempt to consider, examine, review, and discuss 5 factors that could contribute to what we have witnessed.
1. Low returns: With historically 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 seeking returns, it is not! In addition, it makes it easier to borrow funds, on margin, and creates a higher demand (and often a corresponding rise in prices) for stocks.
2. 2017 tax reform: Although President Trump and the Republicans, who pushed harder for this legislation, claimed that it would primarily benefit the working class, the real impact, going forward, favored the wealthiest individuals and the largest corporations, predominantly! This led to higher corporate profits, because they paid less in taxes. Doesn’t it make sense, would it create a rise in stock prices?
3.Business benefits: The corporations of many corporations increased significantly due to the above two factors. When investors consider, price – earnings, or, PHYSICAL EDUCATION ratios, this makes the shares of many companies go up!
Four. Increase the number / percentage of investors: Statistically, there are more people involved in investing in stocks today than in the past. The combination of the use of mutual funds, hedge funds, intraday transactions / traders and online trading programs, allowing more people to participate, has created more demand and often creates rising prices!
5. Greed: As we saw recently, when some took advantage of the Internet, to make a market, for lower quality stocks, using some of the behavior / actions of hedge funds, against them (or, in their interest), this is greed and speculation 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 great one’s strategy, etc.) is never guaranteed. Will you commit to being a wiser investor?