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<\/figure>\nFigure 1 illustrates a typical demand and supply curve. The point where these two curves intersect is termed the equilibrium point \u2013 it is at this point where the price of the particular item is established.<\/p>\n
When the demand increases for an item without an equal increase in supply\u2013 in this case the shares of a particular company, the demand curves shifts outwards to D2 as illustrated in Figure 2. The new demand curve intersects the supply curve at a new equilibrium point\u2013 P2 (a higher price when compared to P1).<\/p>\n
Figure 2: Increased Demand and the impact on price<\/p>\n In contrast, in the case when there is an increased supply of shares on the market but demand remains the same, this excess amount causes the supply curve to shift outwards to S2 and creates a downward pressure on price as illustrated in Figure 3. The new supply curve intersects the demand curve at a new equilibrium point \u2013 P2 (a lower price when compared to P1).<\/p>\n Figure 3: Increased Supply and the impact on price<\/p>\n The factors that influence the demand and supply for shares are numerous, but the primary influence is the long-term earnings potential of companies. If a company demonstrates long-term earnings potential and has a positive future outlook, investors will be attracted to its share and many persons would want to purchase the share of that particular company. This increased or heightened demand will cause the price of the stock to rise. On the other hand, if the company has bleak earnings prospects and a poor outlook, investors would be reluctant to purchase their stock and actually be driven to sell their shareholdings. This excess supply of stock will drive prices lower.<\/p>\n When the stock market experiences a period of continued and sustained share price increases, it is known as a \u201cbull\u201d market. In contrast, when share prices are falling steadily and in a downward trend, the stock market is known as a \u201cbear\u201d market.<\/p>\n There are other factors that affect share prices, such as earnings, economic news and political events. Once listed on a public stock exchange, the companies must report and publish its financial performance periodically. The company\u2019s financial results are normally anticipated by investors as it details how profitable the company was over a particular period of time. It is generally believed that a company\u2019s price will follow its earnings \u2013 thus if the company continues to be profitable and make more money, the stock price should increase. Similarly, if the company is losing money and its earnings are declining, the stock price will usually fall.<\/p>\n The performance of the economy and industry that the company operates in also plays a major role in determining the share price of the company. Thus when economic activity is picking up and the growth prospects of the industry is positive, the shares of the particular companies usually post higher and higher returns as investors believe that the companies that operate within that particular industry or economy will benefit from the improved growth prospects. Similarly, when the economy is losing momentum and the industry\u2019s growth prospects are dampened, the prices of the companies\u2019 stock that operate within the economy and the industry may fall.<\/p>\n Political turmoil and uncertainty normally causes stock prices to fall. Investors are not as confident about the future of the economy and industries as such political upheavals can lead to a change of policies that may negatively impact company\u2019s operations and cost structure.<\/p>\n How to read a Stock Table<\/strong><\/p>\n After the end of every day, the stock exchange normally provides a summary of the day\u2019s events for all shares that are listed on the stock market. This information is usually laid out in a summary stock table as presented in Figure 4. Below details the explanations of the information that is normally presented. If after reading you still don\u2019t understand the meaning of the various terms and workings of the stock market, you can always contact a Financial Advisor who is always willing to help you and bring you closer to the realization of your financial goals.<\/p>\n Figure 4: Snapshot of a Stock Table<\/p>\n While everyone may not want to give up their day job to know every detail and functioning of the stock market, as an investor you need to understand what the stock market is and how you can participate without suffering too many losses.<\/p>\n MF 4TH June 2014<\/p>\n You should consult with a Financial Advisor at the UTC, who can assist you in planning major life decisions and events.<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":" The stock market is a central location where investors come together to buy and sell shares of public companies. The best known stock exchanges are the New York Stock Exchange and the American Stock Exchange while locally there is the Trinidad & Tobago Stock Exchange. In order for any investor to buy or sell a […]<\/p>\n","protected":false},"author":31,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[8],"tags":[],"class_list":["post-222","post","type-post","status-publish","format-standard","hentry","category-articles-whitepapers"],"acf":[],"yoast_head":"\n![\"\"](\"https:\/\/www.ttutc.com\/advisory-services\/wp-content\/uploads\/sites\/4\/2021\/04\/img-6.jpeg\")
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