In the past, few years, we have witnessed, a performance, by our Stock Exchanges, which, exceeded, many of those, 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! In reality, there are, at least, 7 reasons, for this performance. With, that in mind, this article will attempt to, briefly, consider, examine, review, and discuss, 7 possible, reasons/ causes, for this, and what, it may mean, and represent.
1. 2017 Tax Reform Legislation: Although, politically, promoted, as great news, and helpful, to the middle – class, the greatest beneficiaries, of the 2017 tax legislation, has been, the largest corporations, and wealthiest Americans! In fact, many believe, it was, actually, Welfare, for the Wealthiest! One impact was, corporations, made far- more money, not predominantly, because, they expanded, their sales results, but, rather, lowered their costs/ expenses, by paying less taxes. Supporters of this, claim, when large corporations, make more, it helps others, but, the promised, employment boosts, didn’t seem to occur, in any significant way! Since, corporations made greater profits, their stocks, appeared, more appealing, and thus, many investors, sought to get involved! In addition, the richest, potential, investors, ended – up, with a lot more, disposable – income!
2. Artificially – low, interest rates: These past, few years, interest rates, have been, at, or near, historically, low rates! While, it made loans, more affordable, it also, made the cost, of Margin, cheaper, also! In addition, it translated – to, investors, having fewer options, because, the return, on fixed – income, investments, such as Bonds, and bank interest, lost popularity, because of the low return!
3. Cheap Money: Low rates meant Cheap Money, and many took advantage, by investing. Corporations also, discovered, they could borrow, at low rates, and, make themselves, appear, far more attractive, to potential investors!
4. Manipulation/ Day Trading: Larger investors appeared to try to take advantage, by using steps, manipulating, prices – upward, to their advantage! Because of the ease, created, because of the Internet, we have also witnessed, far – more, Day Trading, which, also, tends, to raise the overall, Stock Markets!
5. The Internet: The expansion of Discount Brokerage Houses, and reduced minimums, commissions, etc, combined, with, the ease, of investing, created by the enhancements, from the Internet, has benefit stocks, 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, tips?
7. Strong fundamentals/ optimism: Some of the optimism is warranted, especially, when it comes to certain stocks, with quality fundamentals!
There are many reasons, the price of stocks, have risen! Some are deserved, some are speculative. A wise investor proceeds, with, thorough consideration, and awareness! Know, before you invest! Weigh your approaches, based on your personal comfort levels, and, on a, risk/ reward basis!