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In recent years, we have witnessed a performance of our Stock Exchanges that, many of them, exceeded in previous periods! Although former President Donald J. Trump wanted to take credit for this phenomenon, in reality, it was probably due to a variety of factors, to a significant degree! Actually, there are at least 7 reasons for this performance. With that in mind, this article will briefly attempt to consider, examine, review and discuss 7 possible reasons/causes for this and what it can mean and represent.
1. Legislation Tax Reform 2017: Although politically promoted, big news, and useful to the middle class, the biggest beneficiaries of the 2017 tax legislation have been the largest corporations and the wealthiest Americans. In fact, many believe that it was actually Well-being, for the richest! One impact was that corporations made much more money, not primarily because they increased their sales results, but because they reduced their costs/expenses by paying less taxes. Supporters of this claim that when big corporations earn more, they help others, but the promised job gains don’t seem to happen in any meaningful way. Since corporations made higher profits, their stocks looked more attractive and therefore many investors looked to get involved! Furthermore, the wealthier potential investors ended up with much more disposable income.
two. Artificially – low interest rates: These past few years, interest rates have been at or near historically low rates! While it made lending more affordable, it also made the cost of margin cheaper. In addition, it translated – for investors, in having fewer options, because, the return, in fixed income, investments, such as Bonds, and bank interest, lost popularity, due to the low return!
3. cheap money: Low rates meant cheap money, and many took advantage of it by investing. Corporations also discovered that they could borrow, at low rates, and appear much more attractive to potential investors!
Four. Daily Management/Trading: The biggest investors seemed to be trying to take advantage, using steps, manipulating prices – upwards, to their advantage! Due to the ease, created, due to the Internet, we have also witnessed, much – more, Day Trading, which, moreover, tends to raise the Stock Markets in general.
5. The Internet: The expansion of discount brokerages and reduced minimums, commissions, etc., combined with the ease of investing, created by improvements, from the Internet, has profit shares, etc.!
6. Wishful thinking: How much of the increase is based on fundamentals and quality, and how much on wishful thinking, hopeful reasoning, speculation, and so-called advice?
7. Strong fundamentals/optimism: Some of the optimism is justified, especially when it comes to certain stocks, with quality fundamentals!
There are many reasons why the stock price has gone up! Some are deserved, others are speculative. A wise investor proceeds with careful consideration and awareness! Get informed before you invest! Weigh your approaches, based on your personal comfort levels and on a risk/reward basis.