5 Explanations For The Stock Market’s Growth!


Although some people experience stellar results, while others discover far less profitable experiences, the US stock market is a major component of the overall US economy! What specific indexes mean and represent, and why they go up or down, is often somewhat convoluted! For more than 6 years (before the pandemic), we have seen unprecedented growth in equity performance. President Donald Trump often seems to point to these performances as proof of his superior management of the global economy. However, numerous studies indicate that only about one-third of Americans control (in terms of stock ownership) more than two-thirds of all stock ownership. Also, detailed studies of many aspects of economics-related fields show that Trump’s so-called wonderful economy parallels and continues the last 3 years of the Obama administration. With that in mind, this article will attempt, briefly, to review, review, revise, and discuss 5 possible explanations for the strength and, apparent, growth of the stock market.

1. Few options for investments / investing: With this historically low (or near) extended duration/length, interest rates, other investment opportunities/vehicles, have lost much of their appeal, as bond and bank interest/dividend rates are so low! The Federal Reserve has also recently indicated that there are no plans to raise these rates and has changed its guidelines for assessing inflationary risks/responses etc. As a result, obviously, investing in stocks has gained popularity attraction!

2. Capital gains tax benefit: Profits/gains, from capital gains, called capital gains, are treated favorably by our tax code. Of course, this makes these vehicles even more popular for some!

3. Seeks growth, over time: Historically, investing in quality, long-term stocks has been a great way to hedge against inflation! It is very different from the search for speculation and quick money!

4. Some smoke mirrors – and -: Beware of smoke mirrors – and – especially, when it comes to politicians, doing politics, for their agenda/personal/political gain and/or self-interest! There is a significant difference between a strong stock market and the overall economy, which includes jobs, job quality, inflation, and overall economic strength!

5. Risk/reward and pursuit of higher/better profits: The reality is that stocks go up and down, and a savvy investor considers the overall risk/reward ratio and their personal risk – tolerance, patience, understanding and how that fits into the overall economic plan (personal financial planning).

Historically, the price of shares, and globally, the stock market, fluctuates! Over time, used correctly and wisely, investing in these is a smart/wise part of one’s overall personal financial plan! However, the stock market is often not an indicator of the overall economy, nor of its strengths and weaknesses!

Source by Richard Brody

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