What Causes the Stock Prices to Change?
We all know that stock prices change all the time. Sometimes, they rise real high, at times, they fall real low. There are also times when the stock prices are very volatile and change every minute.
If you are a beginner in the stock market, you’d probably be afraid of this because you won’t know when the stock prices change. However, if you do know the basic things that would trigger the stock prices, then you have absolutely nothing to worry about. Here are some of the factors affecting stock prices.
Supply and Demand
The first factor that affects the stock prices of an individual stock is the law of supply and demand. For example, if there is a high supply of the stock and low demand, then most likely, many people want to sell the stock with no one buying. This will affect the price of the stock. Stocks’ supply and demand ratio change by the minute, so in a day, a lot of things can happen, hence, the volatility of price.
Movement of Foreign Investors
Another factor that affects the stock prices would be the movement of foreign investors in the market. If more foreign investors are putting their money in local companies, then the stock market does go up in general. If they pull out, then the market also goes down. For example, in June 2016, investors pulled out more than a billion dollars from the US stocks. This dropped the market to a low on that month.
Another factor that is often overlooked by many, but still significant factor that affects stock prices would be political activities. Even if the political activities of a country do not directly affect the market, it does have an effect. Stock prices change whenever a political activity affects the economy of the country. For example, the US stock market went to a big low just some time before the presidential debate between Hillary Clinton and Donald Trump.
No, the debate did not cause the immediate drop in the US economy, but it did play a role. Most analysts speculated at that time that the US stock market lost around 1% of its gain because investors were bracing themselves for the debate and watching carefully. The banks also took a fall, but that was most likely because of a big hit from the Deutsche Bank.
Although there are so many more factors that can affect the movement of the stock market, these are some of the basic and shared ones. One thing to always remember is that the stock prices change because of a combination of factors. There isn’t a single factor that can solely bring down or bring up the entire stock market. If you are playing stocks, you just have to do your due diligence when buying and selling.
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