There are lots of factors that determine the price of shares or stocks in the market place. Even though demand and supply meet in the market, no calculation tells investors the movement of share prices.
Nevertheless, one thing is sure to demand and supply affect the movement of shares in the market.
If demand is less than supply, then the price of goods and services decreases. It is essential also to know that low-interest rates increase the demand for funds and vice versa.
In the case of more bears than bulls, the price of stock readily decreases.
Furthermore, it is also essential to note that the marketplace doesn’t operate in a vacuum; hence, a slight rumor or news, war, famine, or an increase in commodities such as oil can have a significant effect on the world markets. This also implies that prices can rise and fall very quickly.
Investors may not possibly predict a price swing on shares and stocks and know the forces behind it, but they can analyze and have a better understanding, which can help them lower the lows to a specific limit. Hence, without much ado, here are the factors that affect share prices.
- Management profile
One of the most significant factors that affect share prices is the management profile. It also has a substantial effect on the success of a company and its stock prices.
It is essential to know that if a company has a skilled professional with a proven track record, then the price of shares of that company will certainly move higher.
However, if the company is not in the right hands of experienced professionals, then share prices may not perform well in the market place.
- The market place
Another significant factor that affects share prices is the market place itself. When demand and supply meet in the market place, there is no perfect calculation that will let investors know how share prices will move.
- Demand and supply
Demand and supply in the marketplace have a significant effect on share prices. If the demand for shares is higher, which implies that there are more buyers than sellers, then a share price will move higher.
On the other hand, if the demand is low than supply, which means that there are more sellers than buyers, then share prices will increase.
You need to know that it is challenging to predict the market trend; your stockbroker can help give you an idea of the current market trend.
- Interest rates
When it comes to interest rates, the demand for money is higher, and the ongoing demand for shares also increases.
On the other hand, if the interest rate is high, then it will lower the demand for money; thus, decreasing the demand for shares.
- Political conditions
The state of relations with other countries to government rules can also affect the share price. Hence if the political situation is favorable, it will favor the price of shares.
- Economy
Significant changes in the economy can also have a big effect on share prices. Under the right conditions, share prices go higher, and their lowest point is always experienced during economic unrest.
The prices of shares increase gradually once the economy has recovered from depression.