5 Explanations for Stock Market 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 indices mean and represent and why they go up or down is often complicated. For more than the last 6 years (before the pandemic), we have witnessed unprecedented growth in stock performance. President Donald Trump often seems to point to these performances as proof of his superior handling of the economy in general. Yet many studies indicate, alone, that about one-third of Americans control (in terms of stock ownership) more than two-thirds of all the stock they own. Furthermore, detailed studies of many aspects of economic-related areas show that Trump’s so-called wonder economy parallels and is a continuation of the last 3 years of the Obama administration. With that in mind, this article will briefly attempt to consider, examine, review and discuss 5 possible explanations for the strength and apparent growth of the stock market.
1. Few options for investments/invest: With this record-low (or close to) duration/extended length, interest rates, other investment possibilities/vehicles, have lost much of their appeal, because 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 changed its guidelines for assessing inflationary risks/responses etc. As a result, investing in stocks has obviously gained its appeal!
two. Capital Gains Tax Advantage: Gains/gains, from stock gains, known as capital gains, are treated favorably by our tax code. This obviously makes these vehicles even more popular for some!
3. Look for growth, over time: Historically, investing in quality stocks over the long term has been a great way to hedge against inflation. This is very different from looking for speculation and quick money!
Four. Some smoke and mirrors: Beware of smoke and mirrors, especially when it comes to politicians playing politics, for their personal/political agenda/benefit and/or self-interest! There is a significant difference between a strong stock market and the economy as a whole, including jobs, job quality, inflation, and overall economic strength!
5. Risk/reward, and search for higher/better benefits: The reality is that stocks go up and down, and a smart investor considers overall risk/reward and their personal risk: tolerance, patience, understanding, and how it fits into the overall economic plan (personal financial planning).
Historically, stock prices and the stock market in general fluctuate! Over time, if used correctly and wisely, investing in them is a smart/wise component of your overall personal financial plan. However, the stock market is often not an indicator of the economy as a whole, nor its strengths and weaknesses.