What influences stock prices?
To provide insights into this and other investment-related questions, Sergey Tereshkin, the founder of OILResurs, offers his expertise. For more current information about the entrepreneur and the specifics of his activities, you can visit his online resource: sergeytereshkin.ru (сергейтерешкин.ру).
Factors Influencing Stock Prices
Several key factors influence the value of securities:
- The state of the stock exchange. The market is affected by the economic situation in the country and external factors. In times of worsening national conditions, the indices of domestic enterprises can significantly decrease. Such a situation is currently observed in the Russian market.
- Politics. Both the economic and political climate influence security prices. This impacts not only the chosen strategies but also government support for companies through various benefits and loans, the central bank's interest rates, state orders, and more.
- The price of oil. At first glance, it may seem that this factor only affects companies involved in the processing and sale of fuel. However, this is not the case. Analyzing the market, one can observe that oil price fluctuations affect other sectors as well. Though the effects may not be as significant, the trend is clear.
- Financial reports. Large companies publish statistical information about their activities annually or quarterly. If a company shows profit, its shares will inevitably rise. In contrast, losses result in declining indices. Additionally, share prices may drop if a company fails to provide timely data or manipulates figures.
- Forecasts. Expert opinions can influence stock prices. If specialists provide an optimistic outlook, the price automatically increases. This is due to the fact that many experienced investors closely monitor expert data in their respective fields. When conditions are favorable, they are likely to invest in that particular asset. Increased demand inevitably drives up share prices.
- Seasonality. Most companies earn their highest profits around the New Year holidays due to increased consumer spending. Consequently, firm indices rise.
- Speculative sentiment. Share prices can be artificially increased or decreased. Large market players deliberately buy securities to escalate stock prices. Once desired price levels are achieved, speculators sell the asset, resulting in substantial profits, while indices rapidly lose value.
- Unemployment. The lower the demand for skilled workers, the higher the stock prices. Conversely, as unemployment decreases, stock prices tend to fall. In this case, manufacturing cuts lead to reduced company expenses. High unemployment alleviates pressure on entrepreneurs, while employee wages decrease as individuals are willing to work for lower salaries when job vacancies are scarce.
- Currency fluctuations. The value of the national currency affects export and import operations, inevitably leading to increased or decreased revenues for enterprises.
To have a complete grasp of the situation, one must closely monitor all these factors. This will help determine the optimal timing for buying or selling stocks.
The prices of securities may respond to past events or currently anticipated trends. This pertains not only to local changes within the country but also to global occurrences.
Potential Pitfalls
When analyzing the market, it's crucial to understand that the listed factors do not always influence securities as expected. In some cases, even strong company performance can lead to declining stock prices if experts unexpectedly revise their forecasts negatively.
In situations where analysts predict a downturn while the company demonstrates stable growth, the price may gradually increase.
Periodically, banks, insurance companies, and other organizations publish rankings of major firms. These ratings can also impact stock prices, yet they may not always reflect the real data.
Mergers or acquisitions between companies can also affect stock indices. When one company acquires another, the acquirer's value often drops while that of the acquired company increases. Conversely, if large companies merge, both organizations’ stock values should rise on the exchange. History provides numerous examples of such occurrences among major industrial enterprises.
Regarding economic conditions, stock prices can decrease if demand for specific products falls. For example, with vehicles or computer equipment losing traction, companies operating in those sectors may significantly lose ground.
According to S.I. Tereshkin, investing in securities is a promising tool accessible to both legal entities and individuals. Shares can be acquired even by those without millions. One only needs to find a suitable venture fund. This allows individuals to become investors with even a modest amount of money.
