The possible influencers on the stock market, part 2

The possible influencers on the stock market, part 2

Last time, we started discussing the potential influences on the stock market. This mainly meant looking at what may affect the opinions of investors. This thus further meant taking a brief look at the sort of financial statements public companies release. In this article, we will continue describing the sorts of factors that may affect people’s valuations of stocks.

Herd mentality

Investors tend to have a lot of their money in stocks. If there are signs that things are going poorly for a company and their stocks, they are going to want to know. Therefore, any major movements in a particular direction are going to have a tidal-wave effect. This sort of movement may happen even when there is no rational reason for it to happen. Even if the underlying performance and business model of a company is sound, emotions could run high. Such emotions could overrun reason and cause a change where there most likely should not be any. The reasons for these sorts of sudden changes usually have to do with news announcements. We shall discuss the sorts of topics these announcements may be about just below.

External market indicators

There are plenty of indicators out there outside of financial statements that inform the price of stocks. For one, any news concerning a company is relevant. This could mean many things. It could mean the performance of the industry a company is in. It could mean any controversies a company has had involvement in, if an employee has done something inappropriate, or they have controversial business practices.

Consumers are likely to take such things into account when deciding whether or not to support a company. After all, it is public opinion that is going to affect the performance of a company at the end of the day.

Conclusion

So far, we have discussed the more micro-economic effects on the stock market. Next time, we will look further into macro-economic factors.

 

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