Why The Stocks Price Goes Up and Down

Have you ever wondered why the price of stocks fluctuated?. Through this short article, I will introduce to you some important factors that can answer your puzzle,

There are several factors that influence stocks prices and the level of return for investors. Key factors are: (1) demand and supply; (2) economic variables i.e. GDP, inflation, interest rates and exchange rate; (3) corporate actions. In today’s brief , we will focus on the economic variables.

The value of any company, its return on investment and stocks price reflects the perception of its earnings performance and growth. If the stock market detects something about a company that may harm its earnings flow, its share stocks price will fall. For example before the announcement of annual financial report investors will analysis the performance of economy or industrial sector of a particularly company to anticipate what her financial report will produce. If the economic performance was bad , the stocks price will fall and alternative is true.

Apart from fundamental a firm performance-related factors, investors are also considering the market information such as economic news. If the economy is expected to rise is a good sign that people will have a strong purchase power in the market for the expected period of the economic forecast. Such strong purchasing power will lead to increase companies revenue within expected economic growth as a result the price of stocks will increase too. Versa versa is also true. For example, the price of stocks for many companies during this hard times of Covid-19 falls due to the fact that a global economy is not doing well.

Dow Jones industrial average index illustrations 2019–2020:

Source: (investing.com 19/9/2020, 7.29)

Down jones index is used to measure the stocks market performance. The graph above shown the performance of stock market between sept 2019 and June 2020. In March 2020 the performance of stocks market was very low than 2019 because many countries were under lockdown and most of economic activities like Transportation, luxury, beverage industries were stopped due to the lockdown and lead a stocks market to fall in prices.

Also political events can cause share prices to rise or fall. Events like changes in government policy, national budget leads to influence the rise and decline of prices. War always lead many shares in the stock market to fall. In the short term, the share price is also affected by intangible factors such as hype and word-of-mouth.

Graph represents political Twitter of U.S president D.Trump

Source: Yahoo finance

Demand and supply have a big influence on the rise and decline of the stocks price for day traders. When the supply of stocks is high in the market tends to decrease the price of stocks while when the demand is high than supply the price of stocks tend to increase.

Company and key members actions in a management also plays a key role to increase and decrease the value of their stocks in a financial market. Companies with a good record of corporate social responsibility tend to earn investors confidence while company which violates accounting rules or involve in any action that can damage a firm image in a public leads to lose investors confidence. For instance. When the CEO of Tesla Elon musk was seeing in a public smoking weed the price of Tesla stocks fall as much as ten percent 10%

Picture illustrated CEO of Tesla smoking weed

Source: (Google image 10/9/2020, 7:27)

Key ideas:

• Stock market performance largely depend on the state of the economy.
• In the short term, when there is bad or good economic news influence the stock prices
• Demand and supply have impact on stocks price.
• Corporate actions influence stocks prices.