Re:Why is the stock market rallying when the economy is so bad?
by paulpauper on Sunday May 10, 2020 @06:11PM
(#23136778)
if a $100 billion dollar company generates $10 billion of profit annually, then that is 10% returned to shareholders every year even if there is no earnings growth.
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Re:Why is the stock market rallying when the economy is so bad?
by kgwgk on Sunday May 10, 2020 @06:42PM
(#23137006)
Sure, with no earnings growth and no price increase shareholders would be richer due to the cash returned via dividends.
But that doesn't explain why the price you pay for $X in earnings is higher in one case than in the other. (Retained earnings could explain a minimal part of the increase.)
There is no reason for that $100bn company to be a $110bn company next year if it has returned the $10bn it earned to shareholders and it's still going to earn $10bn.
Re:Why is the stock market rallying when the economy is so bad?
by mslot on Monday May 11, 2020 @03:27AM
(#23139684)
A reason could be that the yields on other forms of investment are going down. If buyers are willing to accept a 1% yield because they cannot easily get it anywhere else then the share price can go to $1 trillion, or even further if yield is expected to go up over time.