5 explanations for the growth of the stock market!
Although some people experience stellar results, while others discover much less profitable experiences, the American stock market is an important component of the overall United States economy. What specific indices mean, represent, and the reasons why they go up or down is often somewhat 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 overall economy. Yet many studies indicate that only about one-third of Americans control (in terms of stock ownership) more than two-thirds of all the shares they own. In addition, detailed studies of many aspects of areas related to the economy show that Trump’s so-called wonderful economy is parallel and 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 investment / investment options: With this record duration / extended duration – low (or near), interest rates and other investment / vehicle possibilities have lost much of their appeal, because interest / dividend rates on bonds and banks! they are so low! The Federal Reserve has also recently indicated that there are no plans to raise these rates and change its guidelines for assessing inflation risks / responses, etc. As a result, investing in stocks has obviously gained its appeal.
2. Tax advantage of capital gains: Earnings / gains, from stock gains, known as capital gains, are treated favorably by our tax code. Obviously, this 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 mirrors and smoke: Beware of smoke and mirrors, especially when it comes to politicians, who play politics, for their agenda / personal gain / politics and / or for their own interest! There is a significant difference between a strong stock market and the broader economy, 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 the 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 properly and wisely, investing in these is a smart / smart component of your overall personal financial plan. However, the stock market is often not an indicator of the economy in general, nor of its strengths and weaknesses.