I was struck this morning by an article at Yahoo News which proclaims that half of America gets no benefit from the rising stock market. It's an amazing piece of economic ignorance that is either the result of economically illiterate reporters or ones that intentionally mislead America. According to the article, about 43% of people responded to a poll saying that they have no investments in the stock market. The Yahoo reporter then makes the leap that these people will not benefit from a rising stock market. That's just wrong.
First of all, when the stock market goes up, it means that it is easier for companies to raise cash for expansion. After all, companies' selling stock to investors is the whole reason why there's a stock market in the first place. Making it easier to raise cash is another way of saying that companies can expand more quickly. That means more growth and more jobs. Everyone benefits from that.
Second, there is the virtuous cycle to consider. People with investments feel more secure and wealthier (which they are) as their investments rise. These people spend more and invest more. That leads to more growth and more jobs. The additional growth and jobs in turn leads to more investments and a higher market. It's called the "virtuous cycle". Trying to get the virtuous cycle going was the reason why the Federal Reserve did quantitative easing during most of the Obama years. We had a rising stock market but nothing like the one that has been achieved under Trump. In those days, Yahoo cheered the rising stock market. Now that the market is doing much better still, Yahoo puts out stories trying to make it seem unimportant.
It shouldn't surprise anyone when I say that Yahoo News is wrong. It is one of the homes of #Fake News.
First of all, when the stock market goes up, it means that it is easier for companies to raise cash for expansion. After all, companies' selling stock to investors is the whole reason why there's a stock market in the first place. Making it easier to raise cash is another way of saying that companies can expand more quickly. That means more growth and more jobs. Everyone benefits from that.
Second, there is the virtuous cycle to consider. People with investments feel more secure and wealthier (which they are) as their investments rise. These people spend more and invest more. That leads to more growth and more jobs. The additional growth and jobs in turn leads to more investments and a higher market. It's called the "virtuous cycle". Trying to get the virtuous cycle going was the reason why the Federal Reserve did quantitative easing during most of the Obama years. We had a rising stock market but nothing like the one that has been achieved under Trump. In those days, Yahoo cheered the rising stock market. Now that the market is doing much better still, Yahoo puts out stories trying to make it seem unimportant.
It shouldn't surprise anyone when I say that Yahoo News is wrong. It is one of the homes of #Fake News.
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