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Surging Stock Market Reflects ‘Very Bright Outlook’ For Economy, Finance Prof Says – CBS Sacramento – Sacramento, California

Sacramento, California 2021-01-13 12:27:50 –

(CBS Detroit) — The stock market continued to rise last week. Even on Wednesday, Dow Jones rose nearly 500 points the day the riots struck the US Capitol and stopped certifying votes from electoral colleges confirming Joe Biden was elected president. It ended the week in excess of 31,000 and approached a record high. The S & P 500 and NASDAQ also showed a rise that day and that week.

Rising stock prices in the face of government turmoil does not make sense in that respect. Investors value stability, and an angry crowd that interferes with presidential election certification suggests the opposite. But there may be more to talk about.

All three indices showed a decline later in the day when events at the Capitol were snowballing. But when the big news was still the Senate final vote in Georgia, they landed early in the day. Perhaps this story had much to do with the future of the market and the economy in general.

“The rise in the morning is in line with the outcome of the Georgia Senate election, which means that the economy is likely to have a bigger stimulus bill coming soon, which the economy needs and the stock market wants. The majority of Americans want it and will benefit from it, “explains David Cass, a clinical professor of finance at the Robert H. Smith Business School at the University of Maryland.

>> Read: Stimulation Check Latest: Has your $ 2,000 payment potential improved?

Democrats John Osov and Rafael Warnock won the Senate on Tuesday, changing the political situation for at least the next two years. The House of Councilors is currently divided into 50-50. (The Democratic Party actually holds 48 seats, but the independent Angus King in Maine and Bernie Sanders in Vermont tend to vote.) Vice President Kamala Harris voted for all relationships after taking office. Throw. Party-line voting on the hotbutton issue seems likely, given the still-existing partisanship.

With Biden’s inauguration on January 20, the Democratic Party will control the President and both Houses. Their simple majority in the Senate does not give them 60 votes to overcome filibuster without bipartisan support. And that makes widespread law unlikely. But a simple majority gives enough votes to undertake when the president takes office in the presidential election. Biden can identify candidates for the Cabinet and pass bills related to budgets and spending through a legislative process called reconciliation.

One such legislation is another stimulus. This could include checking out the much-talked-about $ 2,000 stimulus and continuing various unemployment programs. Assistance to cities and states and more money for COVID-19 testing and vaccination will also be mixed. A possible target date could be mid-March, when the current unemployment extension will disappear.

So the stock market is paying attention to the news, but reacting on the basis of future implications. Another stimulus to boost the economy will have a direct impact on the stock market later this year.

“The equity market is positive, we are always forecasting or discounting the future, and we are looking six, nine or twelve months ahead,” says Kass. “Therefore, the stock market does not reflect the current situation. The current situation was very severe and very disastrous at the end of March. But it was looking ahead. Next March, What will the economy look like in March 2021? “

>> Read: Stimulation Check Update: How Much Money Will New Parents Receive?

Looking back on the long decade of the pandemic, the outlook for the future of the equity market was consistent and consistently positive. The Dow Jones fell below 19,000 towards the end of March last year and has since found a way to reach record highs around 31,000. Despite the high unemployment rate and difficult economic conditions, several factors contribute to the rise of the market.

“You have a combination of accommodative monetary policy, exciting fiscal policy, and vaccines,” says Kas.

The first blockade in March last year forced people to essentially stay home and shut down much of the economy. After that, the government had to close the hole. The Federal Reserve has sent trillions of dollars into the economy to keep interest rates down. Low interest rates encourage individual and corporate borrowing and potentially increase economic activity. The first stimulus, the $ 2.2 trillion CARES law, brought money into the hands of consumers just as the unemployment rate surged by nearly 15%. And there was a currently fulfilled promise of a vaccine that would allow economic activity to return to its normal version.

Another factor contributed to the upward trend in the stock market. According to Kas, “People are at home and couldn’t spend money on travel, sightseeing, entertainment, going to concerts, etc. The money was effectively used for savings. Use it as usual. And much of the savings have been spent on investing. Plus, as virtually all investors do, while interest rates are kept close to zero by the Federal Reserve. What is the next best option for investors looking to earn a return on a bank savings account, CD, or Treasury bill? And, of course, the best alternative, a very easily accessible alternative , A stock market that invests in the market. “

What happened last Wednesday may have had a silent effect, but optimism about the future remains positive. “It’s an attack on our democracy, the form of our government,” Kas explains. “And what’s the impact? It’s certainly a negative input and certainly adds some risk to the current situation. But perhaps, at least soon, something gets worse. It doesn’t seem to have an immediate impact on corporate profits or the economy unless it gets out of hand.

The upward trend in the market seems destined to continue for a variety of reasons. “The Federal Reserve promises this current benign environment,” says Kas. “The highest and lowest interest rates in almost every possible world. And as the economy reopens after the pandemic, corporate profits will improve. Very positive profit growth is expected in the future. Technology has added a lot to the outcome of the economy. The outlook for the next few years is very bright and I think the stock market essentially reflects that. “

>> Read: “Stimulation Checks Are The Most Not Important” Economists Say When Drafting Aid Packages

President Biden has suggested that another stimulus is approaching, perhaps with voting rights in the House of Representatives and the Senate. “The stock market and economy will then benefit greatly,” says Kas. “And I think it’s likely to happen in the near future.”

The president-elect is also planning to build a more sustainable infrastructure, putting the country “… on an irreversible path to achieving net zero emissions across the economy,” as his campaign states. Put. It will stimulate the economy and create more jobs.

Then there are several vaccines that are becoming more and more available. Initial distributions have been sluggish, lacking coordination among federal, state and local governments, and people are wary of receiving them. However, public health experts believe that vaccination will increase. And economists suggest that market activity improves as society approaches herd immunity.

“The outlook is [for the stock market] I’m very positive, “says Kass. “I’m very optimistic.”

Surging Stock Market Reflects ‘Very Bright Outlook’ For Economy, Finance Prof Says – CBS Sacramento Source link Surging Stock Market Reflects ‘Very Bright Outlook’ For Economy, Finance Prof Says – CBS Sacramento

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