The stock market is just a reflection of the economy, each change in the economic condition brings about a resultant change in the market. They are interlinked with one another. If the economy is booming with profitability then the businesses experience a rise in their supply showcases a rising curve and which is automatically observed in the shares of the company which tends to become valuable. Similarly, a fall in the economic conditions lets one assume the market to function in a falling fashion. Various aspects o the economy such as the government policies, purchasing power, and change in business decisions, major investor advantages, or even a minor change in international or national regulations will simultaneously leave a mark on the market as well. The trend of the stock market can be well anticipated if one has a good amount of knowledge about the economic conditions of the country and the world. In one way or the other, the overall health of the economy can be observed by the movements of the stock. The performance of the stocks is measured daily, monthly, weekly, or on yearly basis, the stock market indexes are used to track and predict the prices of the stocks, when the market shows a rising trend it is called bullish, and when its falls it is said to be bear. The factors that cause these fluctuations can be categorized into those which are internal to the firm or companies and internal factors are again also dependent on the external market which is simply the economy. There are different phases of the economy and it moves in a cyclical fashion i.e. expansion, boom, recession, depression, recovery; each of these impacts the prices. If the economy is about to enter into a recession that is a falling slope then there shall be a forecasted fall indicating fewer profits or meagre dividends. As any particular investor tries to invest in shares that are involving less risk the market trend will generally experience a decrease. Hence if share prices tend to fall they can mostly indicate an upcoming recession but not all falls are related to such a situation as they can also drop due to various other reasons. Sometimes the market also has a very huge rise during the recession this can be possible to one of the major factors that these markets are futuristic and they are already heading towards recovery. Also during boom periods, the markets have had a fall, showing that there can be different dimensions to the same, but while some sectors of the market will be more affected others can even see a rise or have less effect. While all of it depends upon the factor that is influencing change in the market, the best way to look on for good investments is also to keep track of the economic trends.
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Tags : #stock market #Economy