When the phrase stock market is used, some see it as a significant and complex facet of the global economic system. In contrast, others understand it as a collection of various charts, numbers, and acronyms. However, understanding the stock market is very important because it directly affects our daily lives through the rise and fall of stocks. This happens whether you invest in the system or not. In this article, you will learn exactly how the stock market affects our daily lives.
Shareholders affect the direction of a business in a direct way
In large companies, influential investors sometimes become superior to executives and change operating tactics; ideally, this only happens for the better. As a result, we, as consumers, can be affected by price changes, new products, or even the elimination of our favorite brands. But, of course, sometimes, investor pressure has a negative connotation, which can result in a string of layoffs.
The stock market plays a role in job security
Companies are often guided by the stock market when they make decisions about hiring or firing employees. For example, the executives of a large retail company may decide to substantially downsize and close their outlets if their stock price drops sharply. Thus, they try to increase their sales and stabilize their stock prices. As a result, companies try to remain competitive and valuable to investors, and ordinary employees may suffer.
This also affects politics.
Many experts argue that changes in the stock market may cause further political developments. The stock market is a direct indicator of the state of a country’s economy; it gives a clear idea of how economic conditions are developing. Thus, it is even believed that the stock market condition can be used to assess how well the existing president is doing in his job. For example, suppose you are a Democrat who supports Barack Obama’s performance as president, and yet the stock market has a healthy routine, in which case you can be sure you are helping that person. On the other hand, if the stock market is not at its best, that might be a good argument that it’s time to change the government.
The stock market affects the price of oil and gas
If a country’s level of oil production is high, its dependence on it as fuel becomes many times less, and the price of oil on the commodity market will also be low. As a result, the cost of gas will also fall. The same thing works in reverse – if a country’s dependence on oil production is high, it increases its value and results in a higher price in the market and on the scoreboards at your local gas stations, of course.
The stock market affects interest rates and tax rates
The current state of the stock market is a key factor that the government considers when deciding interest and tax rates for its people. When there is a downturn in the economy, the government lowers these rates and the cost of borrowing, hoping that they can boost economic activity by doing so. Now the U.S. market is recovering, and accordingly, the government has raised interest rates to increase investor activity, stimulate action, and increase cash flow. So how do interest rates affect ordinary citizens? Interest rates will affect your rent if you decide to take out a mortgage or a car loan, even if you don’t own a home. This happens because your landlord pays the mortgage with interest, and they need a certain amount to cover it.