Originally published on SeekingAlpha [https://seekingalpha.com/article/4115607-demographics-elephants-stock-market]
Market commentators propose plenty of reasons for why the S&P 500 continues to make new all-time highs. There are three basics concepts that get repeated in various forms. Each has a perspective on the market that is based on the facts and information they value:
It is surprising how many of these experts don't think about the underlying drivers of the markets. Money flows are what drive the market higher or lower. This is fairly clear in the short term, where stocks are driven by discretionary buyers and sellers. When lots of market participants want to buy a stock, the price goes up because the forced sellers (market makers) move their offer prices up due to the increased demand. The same thing happens in reverse when lots of sellers appear. The concept can be applied to markets as a whole, with the "stock" in question being index funds like the SPDR S&P 500 Trust ETF (SPY) or the iShares Core S&P 500 ETF (IVV).
In the long run, it's assumed that valuations become more important, and this is true to some extent. The famous quote from legendary value investor Benjamin Graham is as follows: "In the short run, the market is a voting machine. In the long run, it's a weighing machine." But how long before the weighing machine takes over? It might be that the voting machine can dominate on longer time scales as well.
Getting back to the bear versus bull perspective above, I can appreciate the theories that give importance to central bankers, because they can truly make money flow where they want it to flow. Of course, they have mandates to abide by, so they aren't always providing liquidity like they have been since 2008. Even when central banks are accommodating, their influence (at least in equity markets) is small when compared to something else that people don't talk about very much: demographics.
As we continue to move out of the pandemic and closer to our new sense of normal life, there is growing concern about the condition of the environment, and an increased interest in taking purposeful action to reverse man-made climate change. All generations of consumers are gravitating towards businesses that make environmentally conscious choices, and this trend is exaggerated in younger folks.
Read This Article >Since late March, the stock market has recovered almost all the losses for the year. It is more impressive than other recoveries we have seen in recent years, because when you look at economic data, there is really no reason for such a strong rally. It is true that the outlook is better than it was in March, but the level of uncertainty is still quite high.
Read This Article >It’s the first day of fall, and even though our family lives in California my mind still wanders to Burlington, Vermont at this time of year. For four incredible years I was a student at the University of Vermont studying finance. I learned a lot during those years, but it wasn’t until I had kids of my own that I really put in the time to wrap my head around paying for that magical college experience.
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