Why The Stock Market Bonfire Burns On

 


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Unless you are a totally non-financial type then you know that the stock market has been breaking records just about every other day. In fact since March 2006 the stock market has gone up by 2095 points. In 2006 alone the stock market's return on investment was in excess of 16%. If you think of the current stock market performance as a bonfire you could say that the bonfire shows no signs of going out and in fact seems to be burning brighter.

So why is the market on the rise and what's behind this record-breaking acceleration? Well it boils down to three principal reasons or accelerants.

The first accelerant is earnings or corporate earnings to be specific. Corporate America is making more money then ever before. Earnings in just about every corporate sector have reached unprecedented levels. Look at Exxon-Mobil as a prime example. ExxonMobil made 10.3 billion_ dollars in one quarter in 2006. Earnings like this make the Wall Street bigwigs and stock owners very happy campers to say the least.

The second accelerant is energy. Energy costs over the last quarter have fallen dramatically. Crude oil for example has fallen from over the $70 a barrel range to the upper $50.00 a barrel range. The market has used this drop in energy costs as fuel to propel stock profits.

The last accelerant is the economy as a whole. Although the housing sector has shown weakness recently other parts of the economy are humming right along. Consumer spending is up, employment is robust, interest rates are flat and inflation is under control. The stock market has looked positively on these good economic signs and has sprinted forward.

So due to high corporate earnings, lower energy costs and a stable economy, the stock market is burning bright with profits. If you are an investor or wannabe investor the old mantra of “strike while the iron is hot" seems very apropos right now. It might be advisable to get into the market before the bonfire flames out.

George Stark is an experienced business writer who holds an MBA degree. For more information on stock trading visit http://www.stocktradingclearinghouse.com

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