October 24, 2021

This week saw the S&P 500 hit its 55th record close of the year, a terrific result for that allocated element of our current account balances.  Plenty of reasons exist to support continued gains in stock prices:

  1. Inflation remains rampant, with no signs of abating
  2. Returns on cash remain minimal
  3. New investment grade (not junk) debt has underperformed almost 60% of the S&P 500 this year

The 4th reason is that corporations are sitting on an incredible amount of cash; last tally was $19 trillion, up $4 trillion pre-pandemic.  Often, companies use their cash balances to invest in new products and activities, or save some for a rainy day, but more frequent is the share buyback, where the entities themselves become active buyers of stock; this increasing demand could drive values higher.