Business
Explaining the Stock Market
Learn the basics of the stock market, where shares of companies are bought and sold. Understand why it's a key indicator of economic health.
What is it?
The stock market refers to the collection of exchanges and markets where the buying, selling, and issuance of shares of publicly-held companies take place. These financial activities are conducted through institutionalized formal exchanges or over-the-counter (OTC) marketplaces. Stocks, also known as equities, represent a fraction of ownership in a company. The performance of major stock indexes like the S&P 500 or the Dow Jones Industrial Average is often used as a barometer for the overall health of an economy.
Why is it trending?
The stock market is perpetually in the news due to its volatility and direct correlation with economic events. Recently, it has been trending due to investor reactions to global inflation rates, central bank interest rate hikes, and geopolitical tensions. The rise of new technologies, particularly in artificial intelligence, has also created massive valuation surges in specific sectors, drawing significant investor attention. Furthermore, the increased accessibility of trading through commission-free mobile apps has empowered a new generation of retail investors, adding to market activity and discussion.
How does it affect people?
The stock market directly impacts the financial well-being of millions. Many people's retirement savings, such as 401(k)s and IRAs, are invested in stocks and mutual funds. A bull market can significantly grow personal wealth, while a bear market can diminish savings. Indirectly, market performance influences corporate decisions on hiring and expansion, which affects job security and economic growth. It also shapes consumer confidence; a strong market often encourages spending, which stimulates the economy, whereas a downturn can lead to financial caution.