How did stock trading become so popular in the UK?


October 5 (RP): A new reality has emerged for financial assets due to factors such as the reduction in the rate of population increase around the world, the disparity in the success of various businesses, and the redistribution of wealth.

Long-term economic growth is mainly driven by two factors: an increase in the proportion of the working-age population and an increase in labor productivity. Since 1961, the average annual growth rate of the world economy has been 3.4%, thanks to the increase in the proportion of the population of working age as well as the improvement in the labor productivity. After the year 1990, however, the rate of new people being added to the world’s population fell to just 1.3% per year.

The growth rate of labor productivity had averaged 2.2% per year between 1960 and 2005, but over the past decade the rate has fallen by about one percentage point. Even though worker productivity has declined since 2010, the tech industry has boosted it and redistributed wealth.

The influence of technology

The speed at which digital technologies are transforming organizations has accelerated as a direct result of the outbreak. The digitization of entire industries is a global trend that is driving transformation. Cloud computing and other emerging technologies are increasingly integrated into daily business operations. Alternative sources and biotechnology are also expanding rapidly. Not only that, but many different industries, like alternative robots, IoT, AI, and big data, are on the cusp of a new era of productivity. The savings in time and money made possible by these advanced technologies are often overlooked in academic calculations.

Curiously, until the 1990s, US GDP per capita and average household income grew simultaneously. Since then, there has been a growing difference between these two rates. I think this clearly reflects the disparity in income distribution that occurred as a result of the technological revolution that occurred throughout the 1980s and 2000s (although it did not encompass all industries) . Deindustrialization is also a contributing factor. Traditional companies have been forced to make major cost cuts, downsize their workforces and relocate production outside the United States.

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Concerning interest rates as well as inflation

Moreover, interest rates have reached historically low levels. The vast majority of investment money is held by investment funds and by individual investors who are among the wealthiest in the world. The money has been placed in safe investments, which drive down interest rates.

The united states government tries to find a solution; as part of this effort, it is adopting various redistributive measures, such as higher taxes and more direct financial aid, similar to what was proposed earlier during the Covid-19 pandemic. However, as a result of these efforts, the national debt has increased and inflation is likely to accelerate. These two things can change the way the money is shared in the years to come. Since the start of the Covid-19 pandemic, central banks around the world have spent an average of $834 million per hour to buy bonds, while the United States government has spent an average of $875 million per hour to buy bonds. do the same this year.

Long-term inflation expectations have started to rise following this summer. According to the findings of the New York Federal Reserve Bank York, the level of inflationary anticipation held by households has reached a record level: the general public anticipates inflation of 4% over the next three years. Since hitting their lows in 2020, oil and copper prices have been on an upward trend, and this year they have surpassed their recent highs, which were reached in 2018 and 2011, respectively. In the meantime, the entire market is waiting for Congress to approve a brand new, comprehensive infrastructure plan.

Why there is no competitor for stocks that can be considered real so far

Equity funds have seen a record inflow of cash from investors this year. In mid-August, investors poured $12.8 billion into US equity funds in just one week. EPFR estimates that in the first six months of 2021, a record $580 billion was invested in the stock market. Equity funds could receive more cash this year than in the previous two decades combined if capital inflows maintain their current pace.

The lack of other feasible investment options is one of the main factors contributing to the attractiveness of the stock market. From the perspective of their relative upside potential, equities continue to be attractive.

For a very long time, bonds have been the first historic alternative to investing in equities. However, bonds are now much cheaper in real terms. Despite this, it was projected in May that the total volume of the negative-yielding bond market was $12 trillion.

However, since some of the publicly traded companies in the market are involved in the mining, commodities and manufacturing sectors, which are driving the price increases, stocks can counter the inflationary effect. As the economy struggles to recover from the effects of the pandemic restrictions, these businesses are meeting the needs for resources, natural resources and manufactured goods. By way of illustration, the value of the energy industry in the S&P 500 index doubled between the beginning of November 2020 and October 15. During the same period, the value of shares issued by industrial companies increased by about 34%. Banks generate money from differences in interest rates; long-term rates of return help this sector thrive. Since the beginning of this year, the financial services sector has grown by 37.6%. Even if inflation rises, many companies can keep prices stable and keep customers paying their costs. This is another point in favor of the stock market.


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