Monday, May 12, 2014

The Economy - The Stock Market

The stock market looks to be closing much higher today. So what is driving stocks higher? Here is what I think is driving stocks higher:

*  Low interest rates drive investors into stocks because they can make a higher yield than savings or money market accounts.
*  Low interest rates in bonds are driving investors into stocks.
*  Low interest rates help companies make a better profit, driving prices higher.
*  Low interest rates make stocks the "only game in town" making money.

I think you get my point. As long as interest rates stay low, stocks is the only place to make money. So what will happen when interest rates rise? It is going to be ugly as investors head for the exists and move into bonds and cash. When will that happen? Probably sooner rather than later. The storm is coming.

What do you think?