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2024-12-06 15:13:11

maiakee on Nostr: In the stock market and investment funds, returns are often influenced by monetary ...



In the stock market and investment funds, returns are often influenced by monetary supply increases (like a rise in M2), which can drive up asset prices without reflecting the actual performance of businesses. When the money supply grows, more liquidity is available, and investors may bid up the prices of assets like stocks, real estate, and bonds. As a result, asset values can rise even if companies aren’t seeing significant growth in revenue or profits.

This means that nominal returns on investments may be more a reflection of inflation and monetary expansion than the true economic value created by businesses. In such cases, while investors might see their investments grow, those gains may simply mirror the inflationary effects of an increased money supply, rather than representing a real increase in wealth or business performance. Therefore, monetary policies and inflation can play a crucial role in shaping investment returns.

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