Despite, over a year, from the onset of the primary – cases, of this horrific pandemic, and, the impact on the general , economic conditions, especially, in terms of employment, business closings, and other factors, the worth of the many stocks, and therefore the overall, related stock exchanges, has risen, significantly! Although, some claim, or, actually, believe, this means , the strength of the general economy, it’s important to acknowledge , there, often, is small – to – no relationship, between stock prices, and therefore the health of the economy (and its impacts, on every – day, people)! With, that in mind, this text will plan to , briefly, consider, examine, review, and discuss, 5 factors, which could contribute, to what, we’ve witnessed.
1. Low yields: With, the record – low, interest rates, and, the corresponding, low rate – of – return (dividends, and/ or, interest), on bank deposits, U.S. Treasury vehicles, and company and municipal bonds, stocks benefit, because, there are far – fewer choices, in terms of, where one can invest, and obtain any sort of return. While, for those, borrowing money, low rates, are desirable, for those, seeking yields, it’s not! additionally , it makes it easier, to borrow funds, on – margin, and, creates greater demand (and, often, corresponding, rise – in – prices), for stocks!
2. 2017 Tax Reform: Although, President Trump, and people Republicans, pushing – hardest, for this legislation, claimed, it might mostly benefit the labor , the particular impact, seems – to – be, it favored the wealthiest individuals, and largest corporations, predominantly! This led to, higher corporate profits, because they paid less, in taxes. Doesn’t it add up , it might create, rising stock prices?
3.Corporate Profits: Many corporations’ corporations rose, significantly, due to the above, two factors! When investors, consider, price – earnings, or, P/E ratios, this makes, many companies’ stocks rise!
4. Increase number/ percentage of investors: Statistically, more individuals, are involved, in investing in stocks, today, than, within the past. the mixture of using Mutual Funds, Hedge Funds, day – trading/ traders, and online trading programs, which enable more people, to participate, has created, more demand, and that, often, creates rising prices!
5. Greed: As, we recently, witnessed, when, some took advantage of the web , to form a market, for lesser quality stocks, by using a number of the hedge funds’ behaviors/ actions, against – them (or, in their interests), this greed, and speculation, has created, higher prices, in some instances.
There are many factors, related, to rising stock prices, but, it might be wise, to understand , stock investing (no matter, how great, one’s strategy, etc) isn’t – guaranteed! Will you plan to being a wiser investor?