Despite Volatility This Year, Overall, The Market Keeps Rising
Transcript:
Katie Nealis:
We have another question asking why does the stock market keep going up?
Tom Vaughan:
Yeah, that’s, that’s a good question. Actually, you know, think about it. We just had a giant wave of COVID that came through, you know, last last end of last year, beginning of this year, market went up manufacturing went up a lot in that timeframe. We now have another you know, delta variant that shooting up the market is still going up. We’ve got all of these people all the way through, you know, I mean, the doomsayers are, there’s a lot of man, it’s amazing. I can find those articles constantly. In fact, I tend to pick on him all the time in some of my videos, because you can go back to the downturn, you know, that happened last year with the pandemic. And people felt like this is the next great depression. And so two key pieces that are really driving the market up. Number one, is the government has been putting out a lot of money, whether it’s relief bills, or this do infrastructure plan that was part of this thing. This week, it passed the Senate hasn’t passed the house yet got ways to go to figure out what’s going to happen there. But that along with all the other three relief bills that came out, there’s a lot of liquidity in the market money is coming out and coming out now.
Long term, that can be a problem, right. But if you’re asking right now, why the markets going up just because the government is spending money, then the other part is just to look at what’s happening within the Federal Reserve. Right. So the Federal Reserve is lowered interest rates to zero. What are you making at the bank right now? Not much, what are you making on bonds? I mean, 10 year treasury bond right now 1.3%? A little bit higher, but roughly 1.3%. That’s nothing. And so where are you going to go with the money? You’re going to go the stock market and real estate in this environment? Those are the two areas that generally do well. So where rates are low, and then the Fed is also besides lowering rates, they’re also adding liquidity to the economy by buying $120 billion worth of bonds.
Why are there so many people run around saying the markets going to crash? It’s almost, you know, comical to watch how this goes on as far as that goes. And, you know, could it at some point, because of all this stimulus and all these things, could there be a problem? Yes. But it might take quite a while for that to really manifest itself. So in the interim, we’re seeing a nice steady increase in the stock market. So you know, those basics are their money coming in from the government, low interest rates, those are key to driving stock market doesn’t go straight up, doesn’t go up really fast or anything, but it’s been going up and it’ll continue to go up if those scenarios hold, you know, and when those start to reverse, that’s when things will get more rocky when they start to cut back on bond purchases when they start to, you know, it raise interest rates, but we’re still a ways away from that even happening. Things aren’t aren’t that bad, actually, you know, as far as the basics for the stock market that I look at, things are decent, that’s why it’s going up.
All right. There’s the bell for the close of the market, which happens to be 1pm here in California, Pacific time. And so I want to thank everybody so much for coming today. And I really appreciate all those are some really great questions today. I really enjoyed this. And so you know, feel free to join us again, if you’d like to schedule an appointment, you know, go to our website and hit bookings. If you want to, you know, subscribe, go ahead and do that. If you want to send us your email again, or email us, go for it and look forward to continuing your education. Anyway, thank you very much, and I look forward to talking to you next week.