So the real question is: why is there more demand for stocks?
Here’s me trying to make sense of the unprecedented 2020 bull rally of stock markets.
(A thread)
So the real question is: why is there more demand for stocks?
Central banks across the world, especially the fed in the US, are providing cheap liquidity across the board to institutions.
With interest rates falling to 0% and below, bonds are no longer attractive.
They’ve made risk-free investments such as bonds so unattractive that the only place for money to go is towards relatively risky investments which are stocks.
They want things to become pricey so wages grow, profits grow and people’s perception of recession goes away because you’re getting more money than last year.
Instead of inflation of wages and consumer products, we are seeing inflation of stock prices.
We are not seeing inflation of employee wages and consumer products because supply of these is more than demand.
Central banks are underestimating how many people are needed to run economies these days.
It’s tech and tech causes decrease in prices for consumers.
Why?
https://t.co/xE9j8G2oQB
Nobody wants their money back at 0% interest regime.
You don’t want a dollar today. You want five tomorrow, even if that comes with a risk.
When you invest in stock market, you really dont want to consume that money and hence naturally seek future growth over today’s growth.
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