Wednesday, July 19, 2017

What is Driving the Aggregate Market Up?

       In a rational economic model, there must be new news about expected future real cash flows for the market to rise substantially.  I say real cash flows because in rational models inflation appears in both the numerator and denominator of a DCF model and cancels out.

        What is it about economic expectations that keeps the market rising?  Quite frankly, I don't have a clue.  It seems to me that all potential good news about the recovery, about Trump, and about growth was more than discounted months ago.  If anything, the new news seems to be that growth is more anemic than was previously anticipated and Trump is performing more poorly than hoped.  I keep thinking this has to end.  And end unpleasantly.  But day after day I am surprised as the market inches upward.

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