How are stock markets reaching record highs?published at 08:24 BST
08:24 BST
Nick Marsh
Asia business reporter, Singapore
The Strait of Hormuz is still blocked, oil is over $100 per
barrel, and economists are warning of an impending global recession.
Yet stock markets are soaring. In the US, the S&P 500
closed at a record high, with Asian markets also reaching all-time highs during
the day.
How is this possible?
Some companies do well out of war. Energy and arms stocks
have risen, of course, but in general big firms aren’t really reporting
significant hits to their profits so far. Higher business costs are being
passed down the chain to the consumer.
Also, investment in tech and artificial intelligence is
showing no signs of slowing down and Big Tech companies now make up more than a
third of the entire S&P 500.
A lot of modern-day trading is also automated. Instead of
making conscious decisions based on the news cycle, people are increasingly
investing through funds that track the value of the stock market.
These computer-driven trades will always invest in the
biggest companies and pile more money into the market when there’s an upward
trend.
If you have money in the stock market – things are looking
good. But if, like the vast majority of the world, you don’t – then the
real-life economic consequences of this war will be painful.