Question

how do the strengths and weaknesses of the stock market average impact businesses, therefore individuals?

Answer 1

There are many different ways by which stock markets have an impact on the businesses as well as on the individuals. We are considering some of the impacts of the strenght and weaknesses of stock market on businesses.

Here we will take two basic impacts on businesses, (1). On consumer spending and (2). On business operations.

(1) impact on consumer spending: Bull & Bear these are the two phases of market, in bull a market is on the upside movement and bear is the reverse of bull market. When there is a upside movement in the stock prices consumer spend more, because they see the growth in the value of the portfolios and also in bull phase economy is strong.

But in bear phase the reverse of the bull phase happens and the spending of consumers is impacted by this. Now when consumers spend more, the demand forthe goods increases in the market and to fulfill businesses produce more, thus their income increases.

Now if we see the there is an interlinked chain between market growth and the income that business will earn.

This also affects individuals, if there is a demand for goods, to produce they need extra workforce, hence, individuals will also get jobs and get paid for the work.

(2). Impact of business operations: Now another way by which it affects businesses is that, rise nad fall in the stock prices have an impact on the market capitalization of the companies and also on the market value of the companies being affected.

Market capitalization or the market value is important when a company is going for mergers. Performance of the company's stock is important when they are considering an issue of new shares, because if a stock is more in value the company will be able to raise more capital.

Better performance in the stock market will lead to better future prospects and also attracts investors.

Hence, these are the things that have an impact on businesses and also on the individuals.