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Its really hard to parse out why stock prices are higher when the currency has been debased so aggressively through money printing. When adding trillions each y

Its really hard to parse out why stock prices are higher when the currency has been debased so aggressively through money printing. When adding trillions each year in new money you could easily see prices go higher simply because (a) the dollar lost value and (b) most of that new money ends up in the hands of major corporations. You can look to CPI and inflation data to say that stocks have out competed inflation, though at least right now many Republicans and MAGA supporters don't trust anything coming out of the federal government so the CPI data isn't a metric they would use for comparison. In my experience, there's been a surprisingly large number of conservatives the last few years that deeply distrust our monetary system. Stock prices just don't mean anything with that view.

psychlops 2y ago
I'd suggest prices are higher 1) because they are printing money creating the illusion of wealth 2) other countries are printing money at a faster rate 3) prices on everything are high so might as well invest in the stock market 4) the next generation can't afford a house so park money in their broker for later.
- _heimdall 2y ago
  I definitely agree on the first two, less sure about the later two. Those with plenty of money may be choosing to park it in stocks, but higher prices mean more people don't have that expendable cash. I'd be really surprised if younger people feeling the most pain from housing prices have a broker at all.
gen220 2y ago
It’s because companies in the S&P 500 have pricing power, meaning they can raise their prices to outpace inflation. Which means if their revenue growth was going to be X regardless of inflation, it’ll still be X in an inflationary environment if you adjust for inflation. It’s really that simple. The stock market growth always outpaces CPI growth, unless Big Business is under some other kind of threat. Since this round of inflation came from printing money, not from extrinsic shocks (although there was a brief energy shock two years ago), you’d expect the S&P 500 to outperform CPI, which it did. It’s not ^too^ mysterious.
- _heimdall 2y ago
  While I get the market effects you're talking about, it still hinges on CPI as a goal post. My point was that there's a surprisingly large number of people that completely distrust CPI or any other data coming out of the federal government. And honestly I do understand many of the technical concerns with CPI. Dig into how the calculations are made and how much room they have to manipulate numbers between changing the basket of goods and adjusting prices to account for various factors that they deem explanatory for a portion of price changes and the CPI begins to look a lot less reliable as a long term metric.

psychlops 2y ago

I'd suggest prices are higher 1) because they are printing money creating the illusion of wealth 2) other countries are printing money at a faster rate 3) prices on everything are high so might as well invest in the stock market 4) the next generation can't afford a house so park money in their broker for later.

_heimdall 2y ago
I definitely agree on the first two, less sure about the later two. Those with plenty of money may be choosing to park it in stocks, but higher prices mean more people don't have that expendable cash. I'd be really surprised if younger people feeling the most pain from housing prices have a broker at all.

gen220 2y ago

It’s because companies in the S&P 500 have pricing power, meaning they can raise their prices to outpace inflation. Which means if their revenue growth was going to be X regardless of inflation, it’ll still be X in an inflationary environment if you adjust for inflation. It’s really that simple. The stock market growth always outpaces CPI growth, unless Big Business is under some other kind of threat. Since this round of inflation came from printing money, not from extrinsic shocks (although there was a brief energy shock two years ago), you’d expect the S&P 500 to outperform CPI, which it did. It’s not ^too^ mysterious.

_heimdall 2y ago
While I get the market effects you're talking about, it still hinges on CPI as a goal post. My point was that there's a surprisingly large number of people that completely distrust CPI or any other data coming out of the federal government. And honestly I do understand many of the technical concerns with CPI. Dig into how the calculations are made and how much room they have to manipulate numbers between changing the basket of goods and adjusting prices to account for various factors that they deem explanatory for a portion of price changes and the CPI begins to look a lot less reliable as a long term metric.