Why is the Stock Market All-Time-High, Even With Economic Concerns?

US Investment Advisor | Raleigh Investment Consultant, LLC

With the recent pandemic-related economic downturn, one may expect a similar outcome in the stock market. However, the stock market is all-time-high. Again! How can we explain that!

Although its impossible to explain everything in one theory, here are a few possible explanations:

  1. The stock market is a leading indicator of the economic picture. This means the stock market reacts to economic cycles well before other lagging or concurrent indicators such as consumer price index (inflation), interest rates, or manufacturing data, unemployment rates, etc.

  2. The stock market or any equity market is governed by one fundamental rule: supply and demand. Even though the economy is down, investors (who invest in stocks) still have a positive outlook on the stock market. And when they buy the stocks of good performing companies, the price goes up.

  3. With the interest rates so down, other assets classes (e.g. bonds) may not be a favorable investment at this time. Therefore the stock market is probably where investors want to be to grow their wealth.

  4. Only nearly 52% of Americans invest in stocks. The economic downturn might be disproportionately affecting those people who are not investing in stocks.

A wise investor takes advantage of these economic cycles and imbalance between supply and demand. Whether you are a conservative investor or an aggressive investor, make sure your investment plan is robust regardless of market or economic condition.

US Investment Advisor | Raleigh Investment Consultant, LLC

Delivering comprehensive investment advisory and educational services across the U.S.

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