NY Stock Market Dow Average Price Approaches $ 30,000

NY Stock Market Dow Average Price Approaches $ 30,000 Overvaluation May 24:59 on January 24

The Dow Jones average price on the New York Stock Exchange is rising on the strength of the US economy and the security of low interest rates, approaching the $ 30,000 mark for the first time. On the other hand, some believe that stock prices are overvalued and may not reflect the real economy.

The Dow Jones average price on the New York Stock Exchange has been rising since last fall, with a closing price of over $ 29,000 on the 15th of this month, and the first $ 30,000 mark is imminent.

Investors believe that the continued rise in stock prices is likely to be due to the continued strength of the US economy and low interest rates.

The US economic expansion, which began in July 2009, has been the longest in history for a decade and a half this month, with solid consumption and low unemployment.

In addition, the Federal Reserve Board, the central bank, has cut interest rates three times since last summer, raising the perception that investors will continue to see such low interest rates for the time being, supporting investors' willingness to invest.

On the other hand, some point out that stock prices may be overvalued. One of the factors is the “stock repurchase” in which companies buy their own shares.

The 500 largest US companies have spent more than $ 770 billion in stock repurchases for the year to end September, about 84 trillion yen in Japanese yen, down somewhat from the previous year's record high. However, it is at a high standard.

It is also said that "stock prices are leading indicators of the economy," but some say that the rise in price can be said to be "not reflecting the real economy."

“Buy back bubble”

According to investment research firm Ned Davis Research, the stock prices of the top 500 U.S. companies were up 26% at the end of last year due to share buybacks.

"As a result of the company's continued preference to buy back its stock, the U.S. stock market has changed significantly over the past decade, despite the continued economic expansion, Therefore, long-term investment, such as capital investment, will continue to be a major risk for companies, and shareholder repurchase will be the most effective way to use the funds. "

He also says that because the buyback of shares is called "buyback," I think it's "buyback bubble. I can't tell if it's the right way to use these funds until a couple of years have passed."

Aichi Amemiya, a senior economist at Nomura Securities in the U.S., said, `` Some companies have increased their borrowings by taking advantage of low interest rates, but have repurchased their own shares to increase returns to shareholders. '' Has also been shown to have a significant effect.

Mr. Amemiya said, `` Although stock prices are rising, but because of the strong economy, the low interest rate environment will continue rather than growing, so there are places where stock prices are rising, the economic body temperature felt by people and stocks There may be a difference in the body temperature felt from the market. "

What is “share buyback”?

"Buy back" is to buy back the company's stock that has already been issued by the company from the market, and it is called "buy back" in the United States.

The repurchase is said to have many benefits for companies and existing shareholders. Companies can repurchase their stocks to reduce the number of stocks in the market.

This will reduce the total amount of dividends paid to stockholders and increase earnings per share, which will improve management indicators.

On the other hand, shareholders who already own the company can expect dividends to increase as stock prices rise.

In the United States, the massive tax cut by the Trump administration in the United States made it easier for companies to transfer funds held overseas to the United States, and accumulated a large amount of cash on hand.

These funds were also deemed to have been used for share buybacks, and the total amount of share buybacks of the 500 major U.S. companies in the year to the end of September last year reached $ 770 billion or more than ¥ 84 trillion in Japanese yen. it is continuing.

Apple has the largest share buyback at $ 69.7 billion, or ¥ 7.6 trillion in Japanese yen, almost equal to the total amount of funds used by Japanese companies to buy back shares last year. Scale.