Stocks/shares & what affects them?

Question

How and Why do the following affect share/stock value/price?

1) Interest Rates
2) National Debt
3) Elections
4)Wars (ie why did the gulf war cause oil prices to increase)

5) Any you can think of?

(please answer any of the above or all)

Thank you x

Could you offer any websites (ideally with direct links please) to help further explain this question.

Thank you x

Answer 1

alan greenspan kills the market every time he speaks

Answer 2

1. A company's value is equal to the present value of its expected cash flows. If interest rates increase, then the PV of those flows fall because you are discounting at a higher rate (and they should increase if rates falls). This assumes that the change in rates doesn't also affect the size of the cash flow -- which is why a few stocks react differently.

2. If the national debt increases, then more taxes will have to be raised inthe future to pay back that debt. This can cause higher inflation in the future. Higher expected inflation raises interest rates & we are back at #1.

3. Elections cause uncertainty in the market before the election -- more uncretainty makes people demand a higher return, making stocks go down. After the election, uncertainty goes away -- but depending on who wins, it could have an effect on policy. For example, the stock market does about 9% better per year when the president is a democrat than when he is a republican (this is not a typo -- see the Journal of Finance for more details).

4. Oil prices increased when the war started because the fighting is in oil producing countries -- and had an effect on oil prices. That, together with the fact that oil producing nations have formed a cartel to fix prices puts us in a bad spot.

5. I can think of lots more things -- but they mainly have to do with expections about future earnings, expectations about future interest and inflation rates, and worries about uncerainty and risk.

Answer 3

All of those can affect the markets. Its the overall perception thats important and that comes down to company profits. How much money they will make and what dividend they will return. Everything else wheighs on the perception in so many ways. If interest rates go up people have to pay more on interest and have less available to spen. If interest rates go down there is more free cash in the market. If national debt goes up people may have to pay more taxes taking money away from the overall market. If national debt declines tax rates may get reduced. Elections affect themarket in what decisions will be made to affect proples spending power. Wars affect national debt which will affect interest rates.The cost of oil will raise production and delivery costs or reduce them. Oil is a major one as it affects heating and household expenditur on gasoline and cuts back or increases free spending money. A global recession affects everything and the US market may be due for one as morgage repayments are being missed and houses are being reposesed and that is causing propert valuations to drop. Which in turn means that people will be unable to secure larger morgages and again spending money is taken away from the market. But in that case it is for many diffrent reasons and that can cause a recession and that recession will affect Chinese companies and may bery well spread further.

Answer 4

Company news effects that company the most. every thing effects the market If one person says some thing it goes down or up Greenspane should shut up.

Answer 5

The only thing that affects your shares is when they go down.
Its called market forces and all things affect shares There is no clear answer to this.