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:
- Inflation remains rampant, with no signs of abating
- Returns on cash remain minimal
- 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.