The stock market is a volatile place, and it has been for years. Even the experts don’t know what will happen next! Some people think that we are about to enter into another recession, while others believe that we will continue to see growth in the coming year. This article discusses factors affecting the market.
What is the Stock Market
The stock market is the collection of all companies that trade publicly, also known as stocks. When you buy a share in a company it means you own part of the business and are entitled to some say over how it’s operated. As such shareholders will expect to see profits from their investment – otherwise they may opt to sell off their shares, which will have an impact on the price of that company’s stock.
Factors That Affect The Market
1.Supply and Demand.
The supply and demand for a good is one of the most basic economic factors. The laws of economics dictate that when something becomes less scarce, its price will increase to balance out how much people are willing to pay for it. In other words, if an item no longer has high enough demand at its current cost, then someone can make more money by producing less of it at a higher price.
2.Company Related Factors.
The company related factors that affect the market are its brand value, size of business, competition within industry and riskiness. A company with a strong brand has more to fall back on in terms of its reputation. If it comes under fire, people will still buy its products because they trust the quality and overall value that the business brings them.
Politics has a big impact on the economy and can be seen as one of those factors that affect the market. This is because politics have been affecting stock prices for years, from Nixon to Brexit – no matter who you are or where you work it’s bound to influence your investments in some way.
The exchange rate of a country affects global markets. Exchange rates are the price of one currency in terms of another – for example, if you were to sell £100 and receive $150 then your exchange rate is 50%. When countries have higher or lower than average valuations against other currencies it can affect whether they invest there or not as well as the country’s economy in general.
Current events can affect the market whether it be natural disasters, political upheavals or celebrity influence.
Investor sentiment is the degree of optimism or pessimism that investors have about a particular investment. It can be affected by current events and news, which in turn affects how much they want to invest into stocks.
When interest rates are low, investors tend to look for alternative investments that will bring them a higher return. When they rise, investors often feel less inclined to take on riskier bets and instead prefer safer options which can lead to the market cooling off slightly.
Natural calamities such as earthquakes and tsunamis can affect the market for a short time until reconstruction starts. However, long term they could make an area less attractive to visit or invest in because of safety concerns which could also impact the financial markets.
In conclusion, the market is in a bubble. We have been seeing this since the 1990’s when everyone was buying “dot com” stock and it just continued to grow after that into the 2017-2018 market where there are more cryptocurrencies than people can count, but will it continue? Will we see another market crash or will the market continue to grow?