For 5 years, there has been no increase in the positive profit of American companies, while the stock indices continue to grow incredibly. The capitalization of the S & P500 now exceeds $ 20 trillion. What is it!? A bubble in the market or a regular growth of the economy.
Shares of United States corporations included in the S&P 500 index, whose capitalization is more than 100% of the gross domestic product of the state. If companies show a significant reduction in the price of their shares, then the situation will be at least minimally similar to the theory from classical textbooks on economics. In addition, net profit indicators returned to the level of 2011, and the stock index rose by almost 90%.
Today, markets are entirely aimed at increasing the price of assets, and a kind of “separation” from some factors was urgently needed. Operations of Central banks and corporate departments have a negative impact (a lot of financial resources are used to buy back shares). The volume of buybacks is significantly reduced, but companies continue to buy back their own shares and spend more money on such goals than they earn.
Corporations are increasing their profits by no more than 0.4%, while the rate is significantly lower than inflation. Slight growth was noticed only at the end of 2016, and net profit was at the level of 2011. In addition, the indicators of the adjusted profit of the company are not particularly accurate. As for the opinion of experts, they estimate the probability of corporate income growth in the USA by 15%.
Experts talk about a future slowdown in the graph of growth in company profits. That is why it is worth investing in stocks of corporations that are able to constantly give a stable profit. Nevertheless, one should not think that the stock market will collapse soon. Many investors unsuccessfully played in lowering stock prices and lost money. It is likely that monetary resources will be depleted, after which the shares will go down. Quite possibly, this is another wrong forecast.