stock market

FTSE_100_index

How does the stock market affect the economy?

Movements in the stock market can have a profound economic impact on the economy and individual consumers. A collapse in share prices has the potential to cause widespread economic disruption. Most famously, the stock market crash of 1929 was a key factor in precipitating the great depression of the 1930s. Yet, daily movements in the stock market can also have less impact on the economy than we might imagine. The stock market is not the real economy. Share prices can change for many reasons – such as…

What caused the Wall Street Crash of 1929?

What caused the Wall Street Crash of 1929?

The 1929 stock market crash was a result of an unsustainable boom in share prices in the preceding years. The boom in share prices was caused by the irrational exuberance of investors, buying shares on the margin, and over-confidence in the sustainability of economic growth. Some economists argue the boom was also facilitated by ‘loose money’ with US interest rates kept low in the mid-1920s. These are some of the most significant economic factors behind the stock market crash of 1929. 1. Credit boom In the 1920s, there…

Effect of falling share prices on the economy

Effect of falling share prices on the economy

How do falling share prices affect the economy? Lower share prices mean investors will see a fall in wealth. However, this is unlikely to influence consumption significantly. Most people who buy shares are relatively affluent; if their stocks decrease in value it doesn’t mean their consumption will suffer. Usually, people who buy shares see it as speculative investment. Nevertheless, if the fall in shares is prolonged it will have a small effect in reducing consumer spending. In the long term, lower share prices will harm investment trusts and pension…

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The Role of the Stock Market for Investors

Readers Question: As well, how does the stock market affect the economy? I understand the purpose it serves in raising funds for companies but not the role it plays for the investors? Anything to do with saving? Sorry if it is confusing… Any sort of help would be greatly appreciated. Importance of Stock Market includes: 1. Raising Funds for Companies. Barclays recently announced a share issue to raise just under $9billion. This is to try and help the company survive the credit crunch and so it is important for the banking system, which…

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How Share Prices Affect Companies

Readers Question: A company issues stock and sells it in a primary market at a fixed price. In that case, do fluctuations in the stock market affect specific companies? In other words, when the stock value of company crashes, is that company affected at all? If the company sells 10,000 shares at £1, then it receives £10,000 which it can use for investment. If the share price then fluctuates, it doesn’t change the initial sum the firm gained. For example, if the share price fell to 60p, the firm would…

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Stock Market in 2008

Already since the start of the year the FTSE-100 has fallen 7%. Yesterday, the stock market fell 3% of 190 points on fears related to the growing credit crunch. In particular, American bank Citibank wrote off $18billion from its mortgage defaults. It hopes this will draw a line under the losses in the derivatives market. Although, mortgage defaults in the UK are not such a problem in the UK. The UK is been squeezed by the shortage of capital as investors are unwilling to risk purchasing any ‘subprime’ related debt….