What drives a stock market? Is it strictly gambling sentiment that tosses stock prices around, or is there something more that underlies stock prices?
According to this article by Euronext:
Simply put, the price of an individual stock is determined by supply and demand. The supply of stock is based on the number of shares a company has issued. The demand is created by people who want to buy those shares from investors who already own them. The more that people desire to own a stock, the more they are willing to pay for it.
But the supply of shares of any stock is limited. Investors only can buy shares of stock that are already owned by someone else. So if one person wants to buy, somebody else has to sell, and vice versa. If a lot of people want to buy at the current price and not a lot of people want to sell, the price goes up until more people are willing to sell. When the price gets so high that buyers no longer want the stock, the price starts to drop.
The article goes on to identify several factors that drive stock prices:
In this video from CNN Money, we see some explanations for why the Dow has had such strong performance in 2017. Using the information in the video and the article above, can you identify which of the factors drove the market to its current level?