Ask HN: Why are the stock valuations so detached from reality?
As the title says, why do you think the stock market is (or is hovering) around the all time high levels when the underlying economic indicators are clearly showing the future isn't that bright after all?
I know some will say "it's a bubble", that's fine but why is the bubble growing and what do you think is different from the dot com bubble for example. As far as I understand it, at least two factors: 1. Valuation is based on hopes for future returns, not on current situation. 2. Central banks pumped trillions of dollars, euros, and so on for the last decade. The way they did it was beneficial to investors and less to consumers. So, given endless amount of money and without much of a growth, investors decided to put them wherever possible with shares being an obvious choice. Agree on the second point. First one is generally also true. But future returns with the current stock levels? Or maybe everyone is going short term, trying to ride the wave as long as possible and hoping to be out before the next drop? Economies are expected to reach pre-covid levels in a year or two, which is rather short term compared to many investments. Plus, there are some obvious winners even from this situation and people are betting on them. Additionally, I've seen mentioned as factors companies like Robinhood which let random people invest in a user-friendly manner. I don't have much data on them though. The key word here is "expected", what will happen in a year or two, no one really knows. And we have the presidential elections in the states coming November. A lot of things depend on that too. As to Robinhood and Revolut (which is another similar platform), I wonder as well, how much effect they have on the stock markets wild run.... I think it's just the best way to put 'money to use' other than investing in yourself or your own ideas. Where else would you invest the money? https://www.reddit.com/r/investing/comments/iz5lvq/the_stock... Well, there are many other ways to invest, the stock market probably being one of the easiest as you say... Free money. Unfortunately, nothing is free. Someone always pays the bill.