Leading US stock indices ended Tuesday in the red. The biggest losses were noted by high-tech companies, the share price of which has long raised many questions. In one of the previous articles, we have already compared investing in cryptocurrencies and investing in stocks. And not just in stocks, but in the shares of tech giants like Apple or Tesla. And we concluded that few people buy shares of such companies to receive a dividend profit. Shares of Tesla or Apple are long-term investment tools. The opportunity to earn money on these instruments lies in the continuous (in the long term) growth of their value. That is, Apple or Tesla shares grow on the principle of bitcoin – because they are bought. Demand is growing, and so is the stock price. Of course, the companies themselves are also expanding, increasing production, gaining more and more popularity in the world, but hardly at the same pace as their shares are growing. For example, according to the latest information, about 1 billion people in the world use Apple smartphones. In theory, what is the maximum number of smartphone users from this company? 1.5 billion? Sooner or later, this ceiling will be reached, especially since the prices for smartphones of the apple company are growing from year to year.
But if people buy them, why not raise the prices? But there is no ceiling on the value of the company's shares. They can grow as long as there is an influx of new investors or investments. A person can use a Samsung smartphone, but at the same time buy Apple shares, provoking them to even greater growth. Apple itself can constantly make additional issues of shares or break existing ones into several parts (as it did recently), which allows it to attract more and more money. So, in some ways, the US stock market is the same bubble as cryptocurrencies. Apple's stock has doubled in 2020. But Apple itself has not doubled its revenue and has not doubled itself. This is the"bubble". The value of shares is determined not by real market and economic mechanisms, but by simple demand. Money in the world has become very much, they need to be put somewhere. Especially after in America, for example, about 5-6 trillion dollars were poured into the economy just last year. And they are going to pour the same amount into this one.
Thus, many experts have long predicted a new "Black Monday" for the US stock market. Over the past year, the stock market has grown significantly because of the pandemic, paradoxically. However, sooner or later, rates will start to rise in the States, which will put pressure on the stock market. Moreover, unlike in the UK, inflation in the US is accelerating, although not at a very high rate. And almost the only tool to contain inflation is to raise the key rate, no matter what Jerome Powell says. Thus, now that vaccination is going on at a high rate in America, many investors are simply not ready to increase their purchases of shares of high-tech American companies. Now we need to understand what will happen to inflation after more than $ 10 trillion has been and will be poured into the US economy in total.