The supply and demand equation is getting some unusual attention these days as stock markets post record gains.
There are as many reasons for the stock market going up as there are forecasters to offer them, but one of the more interesting elements that has been added to the conversation is that we’re suffering from a shortage of stocks.
Now this is principally an American discussion but the size of the US market means it affects us all. And as pundits try to explain why the stock market has been setting records they offer up the usual arguments: US tax policy changes are bullish, the economy is strong and so on.
But they also say there is more demand than supply of stocks.
With interest rates remaining very low, there is little interest in things such as savings accounts that pay one per cent. All the money is flowing to the equities market, adding to demand.
Then there are buy-back programs. Companies have excess cash so they are buying up their own stock and extinguishing it, tightening the supply even more and raises stock values further.