| How does the stock market affect ordinary people? |

Walking in the stock market can have a huge impact on the economy and individual buyers. Declining stock prices have the potential to cause macroeconomic disruption. Most notably, the stock market crash of 1929 was a turning point in the Great Depression of the 1930's. However, daily movements in the stock market can also have a smaller economic impact than we can imagine. The stock market is not a real economy. Shares prices can change for a number of reasons - such as correction of overcrowding and a serious fall in stocks do not lead to low growth.

👉En Economy

For example, the stock market crash of 1987 did not cause any economic losses to the real economy. (Although it affects the monetary policy). Britain's fears that lower interest rates will cause the stock market to collapse economically. Instead, economic growth is matched by rapid economic growth rates due to lower inflation.

The collapse of the 1987 stock market (where the share price fell by 25%) did not indicate a major economic crisis, and the global economy continued to grow at a rapid pace.

👉2008 prices fall

However, the decline in share prices reflected the real economic crisis in 2008/09 and after the share price decline in 2008, we had experienced a sharp recession in late 2008 to early 2009. Falling share prices and financial uncertainty have had little effect on the economic downturn.

Shares prices for 👉2020 are declining

The decline in stock prices since the beginning of the year mainly reflects concerns and uncertainties about the global spread of coronaviruses. Shares prices have dropped by 15% and could fall further. There are good reasons to believe that the fall in stock prices is a sign of real economic shock and could be a sign of a recession in 2020. The decline in stock prices - not market volatility - has been shown to raise awareness of disruption of purchases, disruption of the free movement of people and goods, and has contributed to the collective demand as consumers and businesses overuse and investment.

👉2000 - 2004 Bear Market

Between 2000 and 2004, prices dropped sharply (especially in 2002). This was not the cause of the recession, but economic growth has been strong since 2000-2007 - see great resilience. The collapse in stock prices was part of a correction of technical stockpiles, uncertainty following the 9/11 terrorist attacks and the bear market. However, the reversal was not economically significant - the Federal Reserve responded by lowering interest rates, and the economy recovered sharply in the interim bank after September 2001.

In other words, inflation alone does not cause economic downturns, but if inflation reflects a fundamental weakness in the economy - it could be a precursor to a recession

Economic impact on the stock market

1. Financial Impact

The first result will be a decrease in the wealth of shareholders. If a downturn is significant, it will affect their financial outlook. If they lose money in stocks they will be reluctant to spend money; This can contribute to lower consumer spending. However this result should not be given much importance. Often those stock buyers are rich and willing to lose money; Their use patterns are often independent of stock prices, especially short-term losses. In addition, only 10% of households own shares - for most buyers, they will not be directly affected by the decline in share prices. The effect of wealth is particularly acute in the real estate market. (For example, falling housing prices affect many buyers)

2. Pension result

Anyone with a private pension or trust will be indirectly affected by the stock market. Pension funds invest a large portion of their investment in the stock market. Therefore, if stock prices fall sharply and for a long time, they reduce the amount of the pension fund. This means that pension payments will be lower in the future. If dividends fall sharply, pension funds may find it difficult to keep their promises. The key is the long-term movement in share prices. If the share price goes down for a long time, it will definitely affect the pension fund and future payments. This can lead to families having lower pensions and not feel the need to save more in other words.

3. Self-confidence

Often the price-sharing movement reflects what is happening in the economy. For example, fear of recession and global economic downturns can lead to declining stock prices. The stock market itself can affect a consumer confidence. The bad news of declining stock prices is another factor that discourages people from spending money. For example, the fall of 2008/09 in the stock market showed a decline in confidence. By itself, it may not have much effect, but with declining housing prices, prices can be a daunting task. However, there are times when the stock market may appear inconsistent with the rest of the economy. In the depths of the economy, investors can look forward to recovery in the next two years as share prices rise.

4. Investment

A decline in stock prices could undermine the ability of firms to raise money in the stock market. Growing and lending firms often do so by issuing more shares - offering a cheaper way to borrow more money. However, as prices fall, it becomes more difficult.

5. Bond Market

The collapse of the stock market makes some currencies more attractive. People can transfer shares to government bonds or gold. These investments offer better returns in times of uncertainty. Although sometimes the stock market may fall into a crisis in the public bond market

👉How does the stock market affect ordinary people?

Most people who do not have shares will not be affected much over time by the stock market. Still, normal work

About

Hi , This is Pramod Choudhary from Nagaur Rajasthan India. I an student and I would like to share my positive thinking with everyone that's my passion . Thank you