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

Long-term economic growth is primarily driven by two factors: an increase in the proportion of the population that is of working age and a rise in the productivity of labour. Since 1961, the average annual growth rate of the global economy has been 3.4%, which has been driven by the increase in the proportion of the population that is of working age as well as the improvement in labour productivity. After the year 1990, however, the rate of new people being added to the world's population fell to just 1.3% annually.

The rate of growth in labor productivity had been averaging 2.2% per year between 1960 and 2005, but over the course of the most recent decade, the pace has dropped by around one percentage point. Even though worker productivity has declined since 2010, the technology industry has raised it and redistributed wealth.

The Influence That Technology Has

The speed with which digital technologies transform organizations has accelerated as a direct result of the epidemic. The digitalization of entire sectors is a global trend that is causing transformation. Cloud computing and other emerging technologies are being increasingly integrated into businesses' day-to-day operations. Alternative sources and biotechnologies are also experiencing rapid expansion. Not only that, but many different sectors, like alternative robots, the IoT, AI, and big data, are on the verge of a new era of productivity. The savings in both money and time made possible by these cutting-edge technologies are often overlooked in academic calculations.

Intriguingly, until the 1990s, the U.S. per capita GDP and average household income grew simultaneously. Since then, there has been a bigger and bigger difference between these two rates. I feel that this is a clear reflection of the disparity in income distribution that has occurred as a result of the technological revolution that occurred throughout the 1980s and 2000s (albeit it did not encompass all industries). Deindustrialization is also a contributing factor. Traditional corporations were compelled to make severe cost reductions, lower the size of their workforces, and relocate production outside of the United States.

Source (https://stockapps.com/uk/)

Concerning Interest Rates As Well As Inflation

Moreover, interest rates have hit record lows. The great 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 put into safe investments, which are lowering interest rates.

The government of the United States is attempting to find a solution; as part of this effort, it is embracing various redistribution measures, such as higher taxes and more direct financial help, similar to what was offered earlier on during the Covid-19 pandemic. However, as a result of these efforts, the national debt has increased, and there is a significant chance that inflation may accelerate. Both of these things can change how money is shared out in the years to come. Since the beginning of the Covid-19 pandemic, the central banks of the world have spent an average of $834 million per hour purchasing bonds, while the government of the United States has spent an average of $875 million per hour doing the same thing this year.

Long-term inflation expectations began to rise as a result of this summer. According to the findings of the New York Federal Reserve Bank York, the level of inflationary anticipation held by households reached an all-time high: The general public anticipates that they will see inflation of 4% during the course of the following three years. Since hitting their low points in 2020, the price of oil and copper has been on an upward trend, and this year they have surpassed their recent high points, which were reached in 2018 and 2011, respectively. In the meantime, the entirety of the market is waiting for Congress to approve a brand new comprehensive infrastructure plan.

Why There Isn't a Competitor to Stocks That Can Be Considered Real So Far

Stock funds recorded a record inflow of investor cash this year. Midway through the month of August, investors poured $12.8 billion into U.S. stock funds in just one week. EPFR estimates that in the first six months of 2021, a record-breaking $580 billion was invested in the stock market. Stock funds may receive more cash this year than they did over the previous two decades put together if the capital inflow keeps up its current pace.

The absence of other feasible investment options is one of the primary factors contributing to the allure of the stock market. When viewed from the perspective of their relative earning potential, stocks continue to be appealing.

For a very long time, bonds have been the primary historic alternative to investing in equities. However, bonds are now much cheaper in actual terms. Despite this, it was projected in May that the entire volume of the market for bonds with negative yields was $12 trillion.

However, since some of the publicly traded companies on the market are involved in the mining, commodities, and manufacturing sectors—which are the sources of price increases—stocks can counteract the inflationary effect. During the time that the economy is working to recover from the effects of pandemic restrictions, these businesses are meeting the need for resources, natural resources, and manufactured goods. By way of illustration, the value of the energy industry of the index's S&P 500 increased by a factor of two between the beginning of November 2020 and the 15th of October. During that same time period, the value of stocks issued by industrial enterprises increased by about 34%. Banks generate money from interest rate differences; long-term yield rates help this sector thrive. Since the start of this year, the financial services industry has grown 37.6%. Even though inflation is going up, many businesses can keep prices steady and make customers pay for their costs. This is another point in favor of the stock market.