Why Stock Market is so Strong When The Economy Is Weak?

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Why Stock Market is so Strong When The Economy Is Weak?

The global economy is suffering and still weak during the pandemic era, but the stock market continues to strengthen. This disconnection between the markets and the economy may puzzle many investors.

One should note that the stock market is a bit different from the economy. The stock market is a marketplace represented by various indexes. In contrast, employment and production are the keys to represent economic health. Stock prices and economic output, i.e., production and employment, do not move in tandem.

Here are the reasons to understand such disconnections and why traders continue with intraday trading in such situations:

1.  Support from the Tech Sector

One of the support systems for stock markets is tech companies that have provided smooth systems for work-from-home scenarios. The tech sector has thrived in the market. The investors continue trading online with tech stocks. Such participation helped the stock market.

2.  Forward-looking markets

Stock markets are forward-looking, focusing on the belief that pandemic has an end date. With the development of the vaccine for the pandemic, the stock markets express confidence that there will be better treatments in the interim and situations will be better. It would power stocks to new strengths.

3.  Low investments for longer-term profits

Investors with a long-term perspective have taken advantage of expensive investments at a low rate. Majorly, these are investments in large-cap stocks that they have got at a cheap cost comparatively. Investments remained to continue in the stock market. This long-term perspective of the investors is also a reason for the significant boost.

4.  Massive Monetary Stimulus

Money stimulus policies also boost the stock market. Governments globally started injecting money that has increased the money flow in the markets. Some of that money has found a home in the stock market. Because fixed-income instruments have declined interest rates comparatively, it pushed people to invest in the stock market. In this way, money supply and stock prices have moved in tandem. Somehow such stimulus facilitates businesses also and thus, the economy.

These are the major supporting reasons for a rise in the stock markets, even after a weak economy.

If you are factoring in these reasons to enter the stock market and find it a profitable place, you can open a demat account and trading account online. You can go with  free trading account with a SEBI-registered stockbroker. The entire process of opening these brokerage accounts is online.

Also Read: “Ease Your Network Marketing Worries With These Tips

How to choose stocks for Intraday Trading

A beginner in the day trading world can beat the challenge of selecting the right stocks for day trading by considering the following important points:

1.   Stock Volume being traded in the market

Intraday trading is all about the liquidity of a stock. While placing a trade for day trading, consider the volume is being traded in the market at a day. Shortlist the stocks which are available in high volumes so that you can buy/sell the required quantity at the right time.

2.   Stocks in the News

Stocks in the news may perform well, and day traders can take advantage of these stocks. Traders can anticipate the direction of movement of the stock with basic analysis.

3.   Top gainers and losers

You can find the list of top gainers and losers in the stock market based on recent market activities on the stock exchange websites. Such listings are a ready reckoner that helps to select the right stocks. You already have a few selected stocks. You can refine this list with your analysis.

4.   Follow the trend

Intraday traders always move with the trend. If the overall prices increase in the market, the choice will be a stock with a rising price. Thus, utilize wealth creation opportunities in the stock market. It would be best if you have an investing and trading portfolio to reach your financial goals. It will keep you aligned with your goals.

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