US stock markets closed lower on Friday. The Dow Jones Industrial Average added 346 points (0.86%) at the close and amounted to 34,658 points. The Standard & Poor's 500 indexes lost 35 points (0.75%), showing a decline to 4,324 points. The Nasdaq Composite index fell by 110 points (0.80%) to 14,675 points. A fairly large number of macroeconomic reports were published in the United States on Friday, which is not too important for the US currency exchange rate. However, they were able to influence the mood of investors. For example, a fairly important report on retail sales for June was published, which showed an increase of 0.6% m/m with lower forecasts. The consumer sentiment index from the University of Michigan was also released, which fell from 85.5 to 80.8. However, the impact of ordinary statistics on the US stock market now looks quite strained. There is no denying that the stock market continues to grow, and it is growing quite quickly. The Standard & Poor's 500 and Nasdaq Composite indices have shown almost record growth in the last couple of months. Thus, this may partly be a consequence that the Fed continues to pour huge amounts of money into the American economy, which continues to migrate and settle on the US stock market. A very important observation: both of the above indices showed the strongest upward dynamics exactly when bitcoin and the entire cryptocurrency market collapsed. Recall that over the past few months, the main cryptocurrency in the world has fallen in price by about half. Thus, it is quite possible that the money withdrawn from the cryptocurrency market also settled on the stock market. And of course, there is no denying the obvious relationship between the increase in the money supply in the United States and the growth of all the leading stock indices. It is purely inflationary growth. The companies themselves are not becoming more expensive. Their assets, profits, financial results, production volumes, production capacities are growing (at least for many), but not at the same pace that the stock market and the value of their shares have been growing in the last year and a half.
A classic example is the shares of Tesla, which grew eight times in 2020 alone. Tesla did not produce eight times more electric cars, and its revenue did not grow eight times. Tesla continues to remain far behind other automakers, barely entering the top ten largest automakers. Nevertheless, its capitalization exceeds the capitalization of any carmaker. Such is the paradox. Thus, we believe that US stock indices will continue to grow as long as the Fed and the US authorities continue to pour trillions of dollars into the American economy.
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