Why the Markets won't go down ?

Stock markets have given hefty returns to investors in the last few years, especially after the brief fall in march 2020 due to the pandemic.

Stocks have given multifold returns since then and most are trading at their all-time highs.

What is keeping markets up at these valuations and what might cause these PRICES to FALL?

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With interest rates at near-zero around the world(the US, Europe, etc.) and central banks buying financial assets at near-zero rates, the supply of money in the ecosystem has gone up dramatically.

The bond purchases have added more than $4 trillion to the Fed’s balance sheet, which now stands at $8.5 trillion, about $7 trillion of which is the assets bought up through the Fed’s quantitative easing programs.

This cheap capital is a big reason for the sky-high valuation of financial assets across the market. With bond yields at near zero in the US, this capital has found its way to Equity markets, Developing markets, IPOs, the Startup ecosystem, and the crypto-currency market in search of higher returns.

Too much money is chasing limited assets, which has caused asset prices to go up across the financial markets. That's what we are seeing in the crypto market these days.

Through a bond purchasing program, Fed has been buying $120B worth of bonds every month for the last 19 months.

Now as the job data in the US is showing good growth and with inflation at well above the target rate, the Fed is planning to taper this program from this month/ December by around $15B this month and take the buying program down to zero in around 8-9 months.

Now the real question is, "what does this shift away from easy money do to asset prices? And will the companies be able to generate enough returns in the future to justify the current valuations? ”

We at Compound Club, are trying to solve this very same problem and trying to educate fellow investors of the risks and help them find stocks that can compound their money at attractive rates

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Thanks

Kamal J. Sharma