If the world is broken, why are stocks at record highs?Hey zxcv, it’s Mark. At this exact moment, you’re living in 2 separate economies at the same time. In the first one, the stock market is hitting record highs. In the second, rent is eating away at your paycheck, a weekly shop costs double what it used to, and owning a home is starting to feel impossible. So how can stocks keep hitting record highs if the world feels broken? 1) The Stock Market Isn’t the EconomyOne of the biggest myths is that the stock market and the economy are the same thing. But they aren’t really… The economy is jobs, wages, and the price of a loaf of bread or a tank of gas. The stock market, on the other hand, is the value of shares in publicly traded companies and how those investments are performing. So when the stock market is hitting all time highs, that doesn’t necessarily mean ordinary people are getting richer or that life is becoming more affordable. In fact, both things can happen at the same time. 2) The Buying MachineA lot of the money entering the stock market today isn’t actively deciding what deserves to be bought. It flows in automatically. Every month, millions of people are buying index funds on autopilot from their paychecks. A market-cap weighted index fund buys companies in proportion to their size. So the bigger a company already is, the more of your money is forced into it automatically. The money flows toward whatever’s already the biggest, which makes it bigger again. Essentially, the price is being set by people automatically investing very consistently, and not because the companies are getting better at what they do. To clarify, I’m not saying these companies aren’t improving. I’m just saying the money is on autopilot, and autopilot doesn’t exactly read the news… 3) Money Floods The Stock MarketFor over a decade, the world has been flooded with cheap money. After the financial crisis, and in 2020, central banks and governments pumped huge amounts of money into the system and held interest rates at historic lows for years. When your savings in the bank are paying you basically nothing. Naturally, you look for somewhere to invest it, like stocks, property, gold, and Bitcoin, which drives their prices up further. But when you look at the data, who do you think had the spare money to invest? Sadly, it was the people who were already wealthy. So that flood of cheap money didn’t go into wages or shopping baskets in the real economy where most people live. Instead, it went into the laps of people who were most likely to invest it, inflating the price of owning assets while barely touching the amount you get paid for doing a job. So What Can You Do?There’s no hidden secret to building wealth. I spent less than I earned, even in the years when it felt impossible to do so. At the same time, I worked like mad to earn as much money as I could. That’s because there’s always a cap on how much you can cut back and save, but there’s no ceiling to how much you can earn. So focus on increasing your income, keep your spending below what you earn, and invest the difference. It being harder to build wealth is not the same as it being impossible. The system isn’t gonna wait around for you to feel ready… or pause when times get tough. So to get you started with investing, I’ve managed to get you a little something from eToro. They’re giving my readers a free £50 share when they sign up using my link. Get your free £50 share from eToro → https://med.etoro.com/B22426_A131573_Tclick_Snl1.aspx This is an affiliate link. I get a little kickback with every sign up, which goes straight back into funding this newsletter and my free YT content. Thanks! Requires a £100 first deposit. Terms and eligibility apply. Capital at risk. zxcv, what do you think will happen to the stock market in the short term? I’d love to know, so hit reply to this email. All the best, Mark Tilbury |