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Why Have Stock Prices Increased So Much?: 5 Reasons

Why Have Stock Prices Increased So Much?: 5 Reasons
"""Despite the fact that it has been over a year since the first cases of this horrifying pandemic emerged, and the impact on overall economic conditions, particularly in terms of employment, business closures, and other factors, the price of many stocks, and the overall, related stock exchanges, has risen significantly! Although some claim or believe that this indicates the overall strength of the economy, it is important to note that there is frequently little - to - no relationship between stock prices and the health of the economy (and its effects on everyday people)! With that in mind, this article will attempt to consider, examine, review, and discuss five factors that may have contributed to what we've seen.

1. Low yields: With record-low interest rates and correspondingly low rates of return (dividends and/or interest) on bank deposits, U.S. Treasury vehicles, and corporate and municipal bonds, stocks benefit because there are far fewer options for investing and earning any type of return. While low interest rates are desirable for those borrowing money, they are not for those seeking yields! Furthermore, it makes it easier to borrow funds on - margin, resulting in increased demand (and, often, a corresponding rise - in - prices) for stocks!

2. 2017 Tax Reform: Although President Trump and those Republicans who pushed the legislation the hardest claimed that it would primarily benefit the working class, the actual impact appears to have favored the wealthiest individuals and largest corporations! As a result, corporate profits increased because they paid less in taxes. Doesn't it make sense that rising stock prices would result?

3.Corporate Profits: Many corporations' profits increased significantly as a result of the two factors mentioned above! When investors consider price-earnings ratios, or P/E ratios, many companies' stocks rise!

4. Increase in the number/percentage of investors: According to statistics, more people are investing in stocks today than in the past. The use of mutual funds, hedge funds, day traders, and online trading programs, which allow more people to participate, has created more demand, which often leads to rising prices!

5. Greed: As we recently saw when some used the Internet to create a market for lower-quality stocks by using some of the hedge funds' behaviors/actions against them (or in their interests), this greed and speculation has resulted in higher prices in some cases.

There are numerous factors that contribute to rising stock prices, but it is important to remember that stock investing (no matter how good one's strategy, etc.) is never guaranteed! Will you make the commitment to become a wiser investor?"""
 

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"Why Have Stock Prices Increased So Much?: 5 Reasons" was written by Mark under the Finance category. It has been read 89 times and generated 0 comments. The article was created on and updated on 13 January 2023.
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