How does the stock market affect

Tweet News is something that affects stock prices. There may be positive news, negative news or news to which market may not react at all.

How does the stock market affect

By Zach Carter Anyone who studies The Wealth Of Nations hoping to glean insights on the mysteries and mechanics of the stock market will be disappointed. Nor did Karl Marx feel compelled to include the stock market among the damning contradictions and irrationalities of the capitalist system documented in Das Kapital.

How does the stock market affect

The stock market is not an important measure of national well-being, productive capacity or material wealth. The most iconic contemporary capitalist institution is, in truth, inessential to the operation of capitalism itself. A stock exchange is where people go to buy and sell shares of corporations.

Buying stock gives you an ownership stake in a company, but this stake itself has no inherent value. The stock is worth whatever you can get somebody else to pay for it.

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Companies issue stock to raise money for personnel, equipment, research and everything else that goes into providing goods and services. But after the stock is issued, its price is no longer directly involved in corporate finance. We like to think that stock prices are closely connected to events in the real world, and that the values the market assigns are the concrete, reliable assessments of experts.

As the market has rocketed this way and that this week, the commentariat has scrambled into action to explain the deeper meaning. The Guardian, with a bit more precision, explained that investors expect higher interest rates from the Fed.

But none of this is really true. A fall in oil prices might signal a profit boost for a shipping company, but not if political instability disrupts its trade route. The meaning and value of each new piece of data that traders evaluate is dependent on a flood of unknowable future data.

When corporate earnings come in unexpectedly high, traders expect the stock to go up and bid accordingly. Years of low interest rates from the Federal Reserve have discouraged people from buying interest-bearing bonds and spurred purchases of stock instead. When the GOP cut corporate taxes, it created the prospect of companies paying out dividends to shareholders or buying back stock to drive up the price.

The Fed is now steadily raising interest rates, and plenty of stock experts think traders have gotten a little carried away with tax-cut enthusiasm. And so, while the economic data is pretty good, there is a consensus in some quarters that the market is due for dip.

And if the stock market were, in fact, nothing more than a lightly regulated casino, this would be the end of the story. But over the past half-century, we have instead imbued the stock market with an almost cosmic significance. We use stock prices to evaluate the performance of corporate executives.

Because the business world believes stock prices reflect deep metaphysical truths about the state of commerce, big movements in the stock market do, in fact, affect real-world decisions about trade.

Even if its revenues are strong, a company might pull back on major investments in the face of a declining stock market, worried about pessimism over corporate prospects in general.

Bankers looking at a stock slump might decide to withhold loans from perfectly responsible businesses. Most alarming, we have made the financial security of the elderly almost completely dependent on stock market values by making k plans and mutual funds the flagship operations of our retirement system.

The value of your nest egg is dependent not on your thrift or prudence, but on when you happen to invest, and when you need to cash out. But even with that, only about half of all Americans own stock, either directly or indirectly through retirement accounts.

To the extent that the strange casino of the stock market does, in fact, create wealth, it almost exclusively circulates it among the rich.

The idea of using proceeds from business wealth to secure the well-being of society at large is, however, a good one. Instead of tying wealth to the speculative whims of the stock market, we might bind it directly to the productive activities of business.

Instead of having individuals save for retirement by purchasing stock, we could have companies that are turning a profit pay a special dividend into a public fund. We could even call it a tax. Do you have information you want to share with HuffPost?Share Market Today | Share Market Live updates: Get all the Latest Share Market News and Updates on The Economic Times.

Share Market Live Charts, News, Analysis, IPO News and more. Models Show Slight Chance Of Downturn Market Barometer Bias Model-data indicates a slight risk of a correction. The same data also show a better chance of the S&P stalled at or near the July level, with higher and lower runs.


Stock quote for Inc Common Stock Common Stock (CRM) with real-time last sale and extended hours stock prices, company news, charts, and research at Nasdaq. The Little Book of Stock Market Cycles (Little Books.

Big Profits) - Kindle edition by Jeffrey A. Hirsch, Douglas A. Kass. Download it once and read it on your Kindle device, PC, phones or tablets.

Use features like bookmarks, note taking and highlighting while reading The Little Book of Stock Market Cycles (Little Books. Big Profits). Many investors forget that one of the defining characteristics of the stock market is that it's a market.

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