FRIDAY, March 29, 2024
nationthailand

The real force behind the bull markets in US

The real force behind the bull markets in US

DESPITE RISING policy rate, slowing economic and earnings growths, the US stock market has continued to reach new highs for the past few months. What could be the real force that drives this second longest bull markets in history?

One of the reasons is the investors’ quest for growth of some technology firms. 
This explanation happened to support the remark of a Yale Nobel prize winner Robert Shiller who said, in the end of May, based on his adjusted price-to-earning ratio, there were some undervalued stocks including technology, so the stock prices could go up even further. 
However, he also warned that stock prices of a few giant technology firms were already too high. 
It should be pointed out that the latest remark of Shiller on stock prices is quite different from his previous claim that stock market was already overvalued, just a few months ago. 
The changing tone caught everyone off guard since it came from a man with a nickname “Mr. Bubble” who foresaw the last two bubbles. 
It may, one way or another, to reflect the fact that there are many investors in the market holding their hopes for Trump’s fiscal policies that can stimulate economic growth. 
The current rising trust in fiscal policy happens to go in line with the view of the University of California at Berkeley economist J Bradford Delong who pointed out in his article in “Project Syndicate” that “The global North’s current political and economic dilemmas are not so different from those of the 1920s and 1930s. As Keynes noted then, the key is to produce and maintain full employment,…” 
A big real question waiting to be resolved politically, sooner or later, is whether the Trump’s proposed policy package does constitute to an acceptable fiscal policy package, according to the majority of Congress and public, that was able to stimulate enough economic growth and, at the same time, avoiding large long term fiscal imbalance. 
In the meantime, as long as investors still have their hopes on the coming fiscal policy, certain stock prices could still go up further, given that there is no other foreseeable major shock in the near future. 

Professor ARAYAH PREECHAMETTA is a lecturer at the Faculty of Economics, Thammasat University
 

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