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Despite a global pandemic, a closely contested presidential election, and ongoing social unrest, the stock market has continued churning higher. Major indexes over the last six months each rose by 24% or more despite a plethora of intimidating events dominating headlines.
Here we will explore two primary reasons why equity markets have been so strong in the wake of so much chaos — and why the strength could very well endure.
Image source: Getty Images.
1. Support for a stimulus bill
While it seems our politicians rarely agree on anything, another round of economic stimulus has bipartisan support. In his recent comments, Senate Majority Leader Mitch McConnell (R-Ky.) described a new stimulus bill as a top priority. Additionally, Democratic leaders, like President-elect Joe Biden, have expressed their desire for an even larger package than Republican leaders want.
While there are still plenty of specifics to be negotiated, the likelihood of another COVID-19 stimulus bill is solid. Why is that potential money supply increase good for markets?
When Americans got economic relief earlier this year, a large chunk of the new dollars flowed through to equity markets. We know this due to trading activity for several income brackets immediately spiking by 50% to 90% as …
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