Stock markets hit record highs – here are three reasons whyBy Elliot Bullman
Dow hits 25,000, but when will the party end?
In the midst of a long-running bull market that is now reaching momentous proportions, most investors may well have forgotten that just two years ago, during the first five trading days of 2016, the market dropped 6 percent. It was the worst five-day start to a year ever and supposedly a harbinger of bad times.
We know where that ended. Spurred by Donald Trump’s election that November, market indexes surged to record levels and went far higher this year. The Standard & Poor’s 500-stock index gained 19 percent in 2017, the Dow Jones industrial average rose 25 percent, and the technology-heavy NASDAQ composite leapt 28 percent.
And so far this year, stocks have continued their advance. On Thursday, the Dow broke the 25,000 barrier for the first time, and technology stocks are soaring to new highs. Cryptocurrencies like Bitcoin are adding a whiff of bubblelike mania.
Three main factors are behind the charge of this ongoing bull market. Firstly, there is the gentle recovery in economic growth and increasing demand for company’s products across the major drivers of the world economy - Japan and the Asian emerging markets; the Eurozone and, most importantly, America.
Secondly, there is the continuing stable expansion of that other engine of the world economy - China. It is the first time since the financial crisis that such a growth "synchronisation" has happened.
Thirdly, there is little evidence of increasing inflationary pressures, meaning interest rates are likely to remain at close to historically low levels.
Bear markets follow bull marketslike seagulls follow trawlers, ready to feast on the overconfident exuberance of investors chasing valuations ever higher.
For now though, the bulls are in charge and the bears are quiet.
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