U.S. stock market

Please respond to the following:

• Discuss which factors had caused the U.S. stock market to reach new heights in February 2020 before falling sharply due to the emergence of the COVID-19 pandemic. Support your findings by providing relevant data from reputable sources.

Answer preview

Besides, the government reduced interest rates to encourage more investments. Lower interest rates encourage lending and borrowing, which translates into a higher circulation of money. Investments increase economic activity allowing more people to venture into the stock exchange market. Blecker (2016) notes that reinvested dividends were a significant contributor to recovery from the 2008 crisis, seen in the high return index of 32.4% in 2013. Investors were also more willing to buy stocks since there is a high probability that lower interests will translate into higher returns. These are more attractive than the safe havens of cash and deposit certificates, which have significantly lower investment returns.

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