If stocks continue to rise, you will soon need to explain why they keep rising. Courtesy of Bloomberg’s Matthew Lynn, here are four stories you can tell:
The Savings Story: People are putting money aside again… With interest rates close to zero, there’s no point keeping it in the bank. Instead, a wall of money is about to descend on the market, creating huge demand for equities.
The Inflation Story: …You don’t want to be holding cash while inflation makes it less valuable by the day, and central banks keep creating more of the stuff. Instead, investors will switch into real assets that can hold their value, such as stocks, real estate or commodities.
The Takeover Story: The last rally was all about the emergence of the BRIC economies. This one will be about them buying North American and European assets. The rising BRIC giants are going to need technology and brand names, and they will want to buy them.
The Shareholder Story: In the coming years, capital will be in short supply. The only place that companies will be able to get it will be from their shareholders. In return, they will have to be rewarded with higher dividends and stock prices. [Huh?]
(And, in case you’re interested, here’s a more likely story…)
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