Stock market fluctuation has a deep impact:

If you were to ask ten people if they could tell the first word that came to their mind when they hear the stock market, I am too sure that the majority of them will say “fluctuations”. The word is synonymous with the market almost as much as school is with discipline.

The fluctuations can be rapid:

The stock prices keep fluctuating throughout the day increasing and decreasing. Sometimes, the fluctuations are so rapid that it is unbelievable that so much change can happen in so short a time as a day in the market.

Have you ever wondered why the stock market is subject to so many changes and that also so quickly? Why is it that some stocks go up in prices of some come crashing down? Do you know if there is any reason for such volatility in the markets?

In order to understand and appreciate the fluctuations and the impact that it has on individuals, small companies, big corporate and society at large, we must, first of all, have a clear understanding about the working of the stock market. We shall present the facts in pointers. Some of the facts are probably overly simplified but it is important that even the layman understands and that is why the language is kept nontechnical.

  1. Behind the primary stock market, there is also a secondary stock market where the buyers and sellers are actually like bidders in an auction.
  2. On any given trading day, there are buyers and sellers who are ready to buy or sell their stocks;
  3. The buyers and traders could be anyone like individuals, companies, institutions, mutual fund etc.
  4. Whenever there is excess buying than selling the prices skyrocket and people tend to start selling their holding;
  5. The vice versa is true when there is a decrease in demand the prices fall and that is when the people rush in to buy stocks in large numbers if they think that the company will perform well;
  6. The fluctuations as such are a result of a demand-supply curve just like any other economic process.

 

The effect of such fluctuation on the economy is widely felt. Even small changes in the economic, political or the social fabric of the countries or in the world economy can have a lasting impact on the market and subsequently on businesses. When the stock market performs well, the people get on to buying spree but when it is bearish and the prices of the stock start falling, people start pulling back their money and start saving instead of spending.

 

The flush or the pullback of money in the economy is what are the first and perhaps the most significant impact of the fluctuations on small businesses. The manufacturing and the trading sector may see a boost in sales during the bullish times and a lull during the bearish time.