So Uber for example has operated at a loss for years, but investors still believe in its future and they want to hold their shares and see what happens. It doesn’t have to reflect current profitability, current revenue, current market share, anything like that-it’s just a function of how people expect that share to hold value. The weird thing about stocks is that you’re selling a share of the company itself, so ultimately the price of a particular stock is determined by how much people are willing to pay for ownership in that company. But of course GoToMeeting, TeamViewer, or any other application could have taken over the new market share in the same way, and it’s hard to know something like that in advance. And if you were up on the news in January or February, if you knew what was coming, maybe you could have invested beforehand, the value has quadrupled since the beginning of the year so there was the opportunity to earn a lot of money. Obviously a lot more people started using Zoom once the pandemic hit, which meant that investors had more confidence in their ability to turn a profit and grow in the future. You can predict stock performance in certain ways, for example here’s how Zoom stock has grown since the beginning of 2020: Now you might be wondering if stocks don’t depend on how the workers are doing, what do they really depend on? And that question is more complicated than it seems. Now some investors do take these social issues into account, but in general social considerations aren’t part of the value of a stock unless they impact something that’s more directly related to the company’s success-maybe they’re hit with a big lawsuit or some new regulation affects production. The welfare of the workers isn’t something investors necessarily need to spend much time worrying about if they just want to make as much money as possible. So even though workers are sometimes necessary to produce the profits that shareholders are expecting, there’s nothing that ties the unemployment rate, the minimum wage, or anything like that directly to the value of stocks. But if they can replace those workers or make the remaining workers work even harder, that could be enough to bring its value back up even if it hurts the majority of people who work for the company. For example if workers go on strike, a company might not be able to meet its normal production quotas, and that could hurt its stock since investors would worry about profitability. Of course, that doesn’t mean that the working class can’t affect the stock market. The first thing I want to mention with respect to the stock market is that it doesn’t have any direct relationship to the workers.
Stock prices don’t always depend on workers. So that leads to the obvious question, why is the market coming back up if people aren’t going to work, if people are struggling, if a second stimulus continues to be stalled? And my goal in this article is to explain how the stock market works, how it’s related to the workers, and why it can do so well even when so many people are struggling. To put this into perspective, that means that there are almost three times as many unemployed people as there were in February when the stock market began to fall, but the market itself has almost fully recovered during that time and by some standards completely recovered and then some during that time. Meanwhile new unemployment claims are slowing down relative to the beginning of the outbreak, but the overall unemployment rate is still over 10 percent compared to just 3.5 percent in February. And the S&P 500 is right now higher than it’s ever been, that’s right, despite the horror show going on in the financial lives of many Americans, the S&P 500 is at record levels. This could change in the future, but as of closing on August 24th the Dow Jones was at $28,308.46, which means it had already recovered to a level over 95% of what it was in February. But what might be surprising is how quickly they’ve recovered compared to the economy as a whole. So it’s not like stocks haven’t reacted to the pandemic. That’s a drop of around 37 percent, which is an incredible change in such a short period of time, and March 12th was the largest single-day drop since 1987 until that record was broken four days later on March 16th.
Now it’s true that stocks fell dramatically in March, the Dow Jones Industrial Average for example fell from $29,348.03 at closing on February 19th to $18,591.93 at closing on March 23rd. I know a lot of people are curious about the market’s recent performance, and that makes sense. Some industries are doing better than ever.ĥ Reasons Why the Stock Market Is So High Right Now
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