How does a financial expert explain the new highs on the stock market despite economic uncertainty?

How does a financial expert explain the new highs on the stock market despite economic uncertainty?

According to a report by www.faz.net, the article deals with the seemingly contradictory phenomena on the stock markets. Although the global economy is weakening, the stock exchanges in Frankfurt and New York regularly record new records. So the question is: How is this possible?

The answer to this lies in two main reasons. Firstly, the crux of nominal values ​​plays a crucial role. Although the German economy has shrunk slightly in real terms, i.e. after deducting inflation, and Europe is stagnating, companies have more capital in nominal terms. However, this is worth less due to inflation. On the stock exchange, however, the nominal values ​​are considered. Companies' record profits are usually due to the fact that prices have risen and not because more goods were actually produced and sold. Nevertheless, on this basis, share prices and dividends are rising to records, but in real terms the distributions to shareholders are worth less than in previous years.

These developments have a significant impact on the financial market and the financial industry. The discrepancy between nominal and real values ​​creates a certain volatility in the markets as the actual purchasing power is affected. This could also unsettle investors and lead to changes in their investment behavior, which in turn could have an impact on the entire economy.

Overall, it shows that the current records on the stock markets do not necessarily reflect a positive state of the real economy. Rather, they appear to have arisen due to inflation and nominal value effects, which could have potentially negative long-term effects on financial markets and the economy.