News channels, newspapers, prime time chats, magazines all of them are always talking about market performances and all kinds of terms also get thrown in endlessly as if it is all that the world is dependent on it.
Actually, it is!
The nexus between the share market and the individual and the collective psyche is so prominent that one cannot but help in concluding that it is quite dependent on each other. It is almost domino-like!
The stock market influences the consumer behavior:
There is a co-relation between the amount of money that a consumer spends and the movement of the stocks that they hold in the market. Let me explain to you to bring the point home. In a bull market when the share market is doing excessively well, the consumers often tend to spend well on things that they would otherwise not consider buying. This is because in a market that is ‘up’ the general perception of the public is that they have become rich because the value of the stock that they are holding is also high.
On the contrary, when the markets are bearish, the consumers will pull themselves off from spending too much even on necessities leave alone luxuries because they tend to become cautious in a market where the value of the shares that they hold and generally also is low.
The other effects:
When the market is bullish, there is a rise in the value of the stocks of the various companies and the companies can capitalize on the rising stock as a currency. The best way to do this is to raise capital by issuing more shares to the general public thereby raising an issue to raise the capital in the company.
The company can even sell shares and stock to leverage and acquire other fledgling companies in order to avoid competition and to maintain a monopoly in the market.
It’s a circle and not everyone realizes it!
The stock market is presumed to be the most valuable tool for understanding the health of the economy on the whole. When the market prices of the shares rise, the people start feeling wealthier making them confident to purchase because they feel that their purchasing power has gone up. An increased buying n the market sees more influx and subsequently with more revenue generated in the market more things are made or manufactured to cater the consumers. The nexus is un-missable.