A.In Wall Street the “cops” defy all adversities again and again. Since 2009 they have been pushing prices on the American stock market up again and again with their horns. In all these years, the paws of the “bears” have hardly had a chance to stop the Dow Jones Industrial index from running. Even the historic corona crash in February and March of this year was history again after a good six months. The world’s best-known stock market barometer has now broken the 30,000 point mark for the first time after a rapid race to catch up.
Will the rally continue now or will the pessimists – called “bears” in stock market jargon – finally succeed in stabbing the optimists, ie the “bulls”? After all, the overheated market could soon cool down in the short term.
In any case, investors are first of all enjoying the almost dizzying rise in the Dow: it only took four years to go from 20,000 to 30,000 points. And it didn’t take eight years for the index to double: In May 2013, 15,000 was on the board of the New York Stock Exchange on Wall Street for the first time. In the immediate vicinity, the bronze statue “Charging Bull” designed by the artist Arturo Di Modica symbolizes US capitalism.
What is fueling the price increase
The current bull market in America began in 2009. At that time, investors had begun to digest the consequences of the global financial crisis, which had significantly slowed economic growth or triggered recessions almost everywhere in the world. Global share prices were boosted by cheap money from central banks, which put interest rates under pressure and thus made fixed-income securities such as bonds fall in the favor of investors. In 2019, the US Federal Reserve cut the key interest rate three times in a row to avoid an economic downturn. In America, tax incentives and infrastructure promises under US President Donald Trump also fueled the courses.
At the beginning of 2020, however, it initially looked as if the long-standing bull market would come to an abrupt end. Because of the worldwide spread of the corona virus, which can cause the lung disease Covid-19, many governments have sent their countries into lockdown. The Dow fell by almost 10,800 points in the short period from late February to late March. The price gains accumulated over a good three years had thus vanished within a few weeks. The stock exchanges also collapsed drastically worldwide.
But governments and central banks quickly made it clear that they would do everything in their power to counteract this with huge economic and aid pacts. Unemployment benefits for millions of American citizens had been increased and the US Federal Reserve lowered interest rates in two large steps to the extremely low range of 0 to 0.25 percent after the corona pandemic had spread to America in March. In addition, the Fed is pumping additional liquidity into the financial markets through multi-billion dollar bond purchase programs in order to boost the economy with the flood of money. This has allowed the Dow to work its way up over the past few months.
Vaccine test results inspire confidence
The hopes of investors are currently focused on the approval of a vaccine against the corona virus. The American pharmaceutical company Pfizer and its Mainz partner Biontech, the pharmaceutical manufacturer Moderna and the British-Swedish industry colleague Astra-Zeneca recently presented promising test results and thus propelled the markets. Further impetus could come from an additional stimulus package, which, however, Congress and the White House have not yet agreed on even after the election of Democrat Joe Biden as the new American president.