Stock Market Jumps Despite High Treasury Yields

The stock market is up, and that’s good news for the economy. This may sound counterintuitive to some people, but it actually makes perfect sense. It all comes down to an increase in demand. Demand increases when stocks are performing well, which incentivizes investors to buy more shares of companies on the stock market. This leads to higher demand for goods, services and labor a classic sign of a healthy economy!

The economy is a complex system, but it’s also simple at the same time. It all comes down to an increase in demand from those looking to buy goods and services being met with an increase in supply from those selling goods and services. When there is a perfect balance between these two factors, you have equilibrium. When someone is buying goods they are also selling something at the same time, whether it be an investment or good/service, because when you buy one thing you are in effect selling something else. You can’t have a trade deficit for very long in this case. For every single purchase there is an equal and corresponding sale of some sort of investment, good or service.

The chart above shows this perfectly. When the stock market is up it leads to a higher demand for goods and services, which leads to more jobs being created. You can see that both GDP growth and employment rates increase as a result of the S&P 500 going up! Higher wages mean people have more money to spend, which leads to increased demand for goods and services. This also means people are able to save more money, which is another great indicator of a healthy economy. The increase in saving means investing, which further increases the S&P 500! The market really does work in everyone’s favor when it comes to economics. It may seem like money has changed hands when you buy something, but what is actually happening is people who are selling goods/services are also buying other investments on the stock market. The stock market is a platform where people from all over the world can come together to transact with few to no costs! For example, if someone bought a share of Microsoft they could then turn around and turn that share into cash, or they could download Office onto their phone or computer.

The stock market is also an incredibly efficient instrument to reduce inequality for several reasons. First, it’s the largest pool of investable assets in the world. As a result it has helped people who would otherwise be unable to access capital to do so at a lower cost than in a bank. Second, it’s a zero-sum game when it comes to the market as a whole. What one person gains from participating in the market, another loses at the same time. This means that everyone who is participating benefits from an increase in the market because their investment will increase during times of growth. The economy has done well under both Democrat and Republican administrations, but it has definitely benefited from the latter.

President Trump inherited an economy that had been greatly damaged during the global financial crisis of 2008-2009. The stock market is at record highs now, but this is because he took over an economy that was primed to grow based on policies put in place by President Obama. The stock market was in the process of making a comeback, and President Trump is in no way responsible for what has happened in the last nine months. The thought that his policies caused the sudden growth is laughable when you look at how much work it takes to pass policy through Congress these days. In fact, he actually proposed cutting taxes for people in the highest marginal tax bracket, which would not help at all when trying to stimulate an economy that has been in recovery mode for almost a decade.

Now let’s look at what he can take credit for and I put this list together pretty quickly so it may be incomplete. He nominated Neil Gorsuch to the Supreme Court, who despite his fascist views, is very likely to stick to the Constitution and he helped pass a law that will allow people to invest in Alternative Minimum Tax free.