The NYSE Dow Jones closed above 28, 300 point at the end of December, 2019. Identify Three [3]
variables which you think causes the DJ to increase the stock market and discussed in detailed not less
than 200 words.
Firstly, the NYSE Dow Jones increased at the end of December 2019 may due to the latest situation of
the US-China trade war. On 31 December, 2019, President Donald Trump has announced he will sign a
long-awaited trade agreement with China on 15 January 2020, the U.S.-China trade war abated by the
end of 2019. Such announcement is expected to reduce tensions between the two economic giants.
Trump started to call off plans for tariff increases on Chinese goods, citing progress on the deal. And
China had promised to increase purchases of US agricultural products and boost intellectual property
protections, while the US rolled back some tariffs. All these actions between countries reduce the cost
for running business in both countries and increase profit margin. While the future market prospects are
positive, the Dow Jones increased.
Secondly, the U.S. Federal Reserve cut the interest rates by the end of 2019 in order to stimulate
economic growth. As the earning from depositing money into the bank is lower and financing cost is
lower, it can encourage borrowing and investing. While more investors have more investment, the Dow
Jones increased.
Thirdly, the U.S. Federal Reserve buys USD 60 billion short term bills every month since Q4 2019. It
increases the money supply in the economy by swapping out bonds in exchange for cash to the general
public. Besides, the bonds market price does down. As to an investor, there are an opportunity cost
between buying bonds and stocks. Thus, as the return from buying bonds is lower, investors will buy
more stocks. Thus, it boosts up the Dow Jones.