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Stock Market Recession

by
Learning sharks stock market Institute

Topics Covered

  1. Key Facts
  2. LABOR MARKET
  3. STOCK MARKET
  4. INFLATION
  5. THE FED
  6. Stock Investors Better Hope a Recession Has Started

Importantly, Investors are becoming less confident that inflation will decline enough to prevent a recession over the next year, despite new data suggesting the Federal Reserve’s efforts to ease rising prices may be working. Experts warn the risks are only growing as the depressed sentiment drives the stock market deeper into a weeks-long trough.

Key Facts

  • The S&P 500 plummeted on Friday to its lowest point since mid-July as the Bureau of Labor Statistics revealed that the unemployment rate increased in August for the first time in seven months, rising to 3.7% from 3.5% in July as fewer Americans were hired and more people began looking for work.
  • The data was “good news” for the Fed because it suggests that the economy is slowing down enough that inflation may soon follow suit, according to Bank of America analysts who spoke to clients after the data’s release. However, they also predicted that the economy will enter a “mild recession” later this year as the Fed continues to raise interest rates, potentially pushing millions of Americans into unemployment.

  • Adam Crisafulli of Vital Knowledge Media asserts that “the Fed isn’t close to declaring victory,” adding that “there’s still more work to do and further tightening to come” and recalling that Fed Chair Jerome Powell stated last week that households and businesses will experience “some pain” in order to cool demand and lower inflation.

  • In remarks sent by email, economist David Page of AXA Investment Manager warned that the picture might become worse if new data shows that inflation isn’t decreasing and that the Fed will need further evidence of economic conditions softening before fundamentally altering its policies.

  • Page predicts that employment growth will slow to 100,000 new jobs per month by the end of this year, which would be the slowest growth since 2020 even if inflation does moderate. This would likely help prevent higher-than-expected interest rate increases.

LABOR MARKET

Firstly, After the economy recovered from the Covid recession, the labor sector remained one of its strongest pillars, but Friday’s employment report may indicate that hiring is starting to slow down. The number of Americans employed or seeking work reportedly reached a record high last month, surpassing the pre-pandemic peak for the first time.

STOCK MARKET

Secondly, The lackluster jobs report was expected to be good news for stocks, but as recession fears grew on Friday, the market swiftly gave back gains. Since its August peak, the S&P 500 has dropped roughly 9%, and this week it has dropped 18%. The S&P 500 will decline by another 8% by year’s end, according to Savita Subramanian of Bank of America. The tech-heavy Nasdaq Composite Index, however, has further descended into a bear market. This year, it has decreased 27%.

INFLATION

Also, According to Luke Tilley and Rhea Thomas, analysts at Wilmington Trust, “the forecast for inflation remains the key concern for investors.” Although gasoline costs have decreased from record highs, they point out that food and rent prices are still persistently high and may make the picture more complicated in the months to come. On September 19, when the Bureau of Labor Statistics releases its consumer price index for August, there will be another significant inflation reading.

THE FED

Clearly, Bond markets increased their belief following Friday’s jobs report that the Fed will raise rates by 50 basis points—and not the worse-than-feared 75 basis points—but the direction of monetary policy is still quite unclear. Powell’s remarks to policymakers on Thursday at a Cato Institute conference may provide insight on the size of the upcoming rate hike on September 21.

Stock Investors Better Hope a Recession Has Started

Surely, A debate has erupted about whether the US economy is experiencing a recession. There is general agreement that a recession is a contraction in real economic activity, but there is disagreement over how severe, pervasive, and protracted the contraction must be to qualify as a recession. Investors should adopt a practical approach, while economists and politicians can argue over theory.

 

The segment of the business cycle known as recessions removes economic waste and prepares the way for the following growth. Weaker consumer and business borrowers make defaults, and stronger borrowers limit their expenditures, which reduces debt. Projects and concepts that fail are written off, and money is no longer lost in financial black holes. Bubbles burst. Frauds are exposed and dealt with harshly. Workers reposition themselves for future economic growth by moving, retraining, and in other ways. Business operations reorient to the most promising regions. Businesses that are no longer relevant disappear, making room for innovations.

 

Recessions should be welcomed by long-term equities investors, as painful as they are for people and businesses. On average, seven months pass before the start of a recession after the stock market peaks. Prices have dropped more than 20% since the latest equities top, which was November 2021 on an inflation-adjusted basis. If a recession is deemed to exist now, it most likely began in January 2022. Is it better for investors if the economy enters a recession in the first half of 2022 or if it continues to grow?

 

According to the National Bureau of Economic Research, the average length of the last 30 US recessions was 10 months, during which time the real total return on equities was negative 21%. This is based on equity falls of more than 20% that were followed by recessions in less than four months. Bull market periods with an average total real return of 135% were then followed by these. By the ensuing market top, an investor who purchased at the peak just before the recession would have earned 85% more after inflation.

 

For investors, equity drops of over 20% without a recession within four months were substantially worse. First, stocks remained below their prior top for an average of 13 months. A typical 20-month recession came after that. The average stock loss was only slightly higher than the average for the first batch of decreases (down 26% versus down 21%), but the rebound that followed was far less robust (plus 72% versus plus 135%). As a result, the peak-to-peak real total return was 85% when 20% equities drops were swiftly followed by recessions, as opposed to only 27% when the 20% decline was not.

 

Although I am unable to demonstrate this with thorough analysis or data, one obvious explanation for the pattern is that attempts to prolong and lessen the agony of recessions result in them lasting longer and clearing out less. Because the Federal Reserve maintained interest rates so low for so long and the government implemented so many stimulus measures, it’s possible that we are not currently in a recession. While they can ease the burden on people and businesses and delay the onset of the recession, they may ultimately result in greater suffering and less gain.

 

The second straightforward explanation is that supply chain problems, difficulties with the reopening, and high energy and commodity costs as a result of the conflict in Ukraine will result in negative GDP growth in 2022.

 

Despite the fact that we experienced two consecutive quarters of negative GDP growth, which is a common definition of a recession, it is possible that these events were caused by exogenous problems that only affected a small portion of the economy rather than an endogenous cascade of excessive debt and misallocated resources across the entire economy. In that instance, the 20% drop in the stock market may have been a response to a supply-side shock rather than a sign of impending recession. Before the following recession, the stock market may reach a new high.

 

Unfortunately, I can’t discover any examples of that later story in history. Although it might be accurate, the US economy doesn’t appear to have experienced it at any point in the last 150 years. Stock market declines followed by swift, brief, shallow recessions, and robust post-recession expansions are two scenarios that we know commonly occur, as are stock market falls followed by sluggish, protracted, deep recessions and weak post-recession expansions. Investors should wish that we are in a recession if those are the only two options.

 

More From Bloomberg Opinion Contributors:

 

To assume that things are bad is quite dangerous, according to John Authors

 

• Mohamed El-Erian on Why Stocks Stopped Focusing on Fundamentals in July

 

• Do We Experience Recession? Don’t ask about Stephen L. Carter on Wikipedia

 

This article does not necessarily represent the viewpoint of Bloomberg LP and its owners or the editorial board.

 

At AQR Capital Management, Aaron Brown served as managing director and director of financial market research. He may have a stake in the subjects he talks about because he is the author of “The Poker Face of Wall Street.”

Stock Market Recovery

by
Learning sharks stock market Institute

In June, the US entered bear market territory formally after a 20% decline from its top in January. There is an immediate global discussion about whether this is the beginning of a lengthy decline or just a hiccup before a stock market revival.

 

Which one is it then? Will the stock market rebound as we enter the second half of the year, or should we fortify our defences and brace ourselves for further declines?

 

What’s happing with the stock market so far in 2022?

 

It’s helpful to consider how we got here and remind ourselves of a few things before we wonder when the stock market will return.

 

First of all, market volatility (ups and downs) comes with the territory. It’s important to emphasise that this is nothing new because it’s possible that this is the first time new investors have encountered a fall from grace.

 

The cost of hoping that company shares will outperform cash over the long term is ups and downs that come in as many sizes as McDonald’s drinks.

 

We might have been duped into believing that indices only go in one direction by the US IT sector’s two years of spectacular outperformance. Nobody likes to see their stock decline, but before prices become wholly divorced from earnings, a reality check might not be such a bad thing.

 

However, it involves more than just financiers pushing the pandemic tech narrative.

 

Why is the stock market down?

Regrettably, equities are currently under attack from all sides. Additionally, there are bottles from all over the world in the liquor cabinet hidden behind this year’s quite awful market cocktail.

 

Following Covid’s threat to return, China was once again forced to shut down entire cities. Shenzhen, a significant financial and technological powerhouse with more than 17.5 million residents, vanished overnight when the government’s zero-Covid policy went into effect.

 

The pause in China’s recovery has been felt across the globe because of its significance in terms of manufacturing and global supply networks, as well as its demand for commodities to power its enormous facilities.

 

Companies already struggling to keep up with a post-pandemic rise in demand are dealt a double blow by China’s ongoing lockdowns. The issue was that they drastically reduced capacity during the pandemic and have had trouble ramping it back up to meet demand.

 

 

All of this has caused inflation to soar this year, adding fuel to cost flames around the globe. And central bankers like J. Powell have been pounding on the brakes and raising interest rates because they are terrified of runaway inflation and the harm that could result from it.

 

High-valued technology has suffered as a result, and as the top brands earlier this year accounted for about 25% of the US market, their demise also affected the rest of the market.

 

We might, however, be about to complete a circle. The markets now appear to think that Powell’s and his Federal Reserve bankers’ actions will cause the US economy to enter a recession. In fact, a lot of analysts already believe that the US is in a recession.

 

Supply networks may be beginning to hum once more as all of this is happening. In light of this, we might be in for a time of decreased demand caused by a recession and rising supply.

 

How long does it take for the stock market to recover?

 

It seems sensible to look at the past and attempt to extrapolate from previous bear markets to the current one. When we don’t know the answers, we constantly try to invent our own patterns or hunt for existing ones to comfort us.

 

However, given the enormously broad spectrum of variables influencing markets before, during, and after prior disasters, it is not the best use of our time.

 

Therefore, you won’t discover it if you’re looking for a stock market recovery time chart that you simply wish to follow, like a Jamie Oliver 30-minute dinner. Your terror, not your composure, is what is speaking.

 

Since World War II, bear markets have, on average, taken 13 months to get from their peak to their bottom, while it takes 27 months on average for the stock market to recover.

 

Zoom out and there are reasons to be a little more upbeat even though it might sound like a torturous trek down and back to breakeven.

 

Will the stock market go up again?

At the top and bottom of the market, nobody sounds like a bell. And there’s a good reason why we ought to accept that uncertainty. It enables us to look at businesses in real life and determine whether the market is treating them properly.

 

If everyone possessed a reliable Magic 8 Ball and could accurately forecast when the stock market will return, how the trajectory will look, and which stocks will do well, the market would become completely efficient. There are no mispricings, no opportunities to purchase equities for less than they are worth, and no use in actively picking stocks.

 

Even while it can be unpleasant, uncertainty offers us as investors opportunities.

Therefore, it would be preferable for us to focus on the businesses we believe are being unfairly tainted by the general downturn while we’re all searching for the catalyst that propels us forward once more.

 

History has shown us that this moment will pass, so there’s no point in holding your breath in hopes of being able to exhale in relief once the stock market has recovered. Perhaps this is a good opportunity to consider some recent high values in your portfolio.

 

What are the possible recovery scenarios?

 

It’s interesting to think back on the pandemic recovery scenarios that were promoted. The optimistic V-shape changed into a U-shape, then came a potential W-shape and the perplexing K-shape. We’re still not entirely certain what that one meant.

 

Every day, more possibilities were added to the alphabet soup.

 

Actually, it indicated that everything was possible. However, if you lay them all out in advance, you can’t help but succeed at least once and congratulate yourself. Clock issues and all that.

 

Therefore, while making technical predictions about a potential rebound is basically pointless, there are some general trends that could lead us in the right direction.

 

Investors specifically want to see inflation decline and interest rates remain unchanged in relation to economic difficulties.

 

Realistically, markets might react positively at first if governments manage both.

 

Mathematically speaking, valuations would increase if rates started to decline and inflation started to decline.

 

However, when it comes to restoring investor confidence, the market’s decision that valuations are unreasonably low in light of the challenges it faces will likely mark the turning point. Markets only need to perceive that the problems of the risk provided are amply reflected in share prices; problems don’t necessarily need to go away.

 

Stock Market Return

by

Topics Covered

  1. What Is the Average Stock Market Return?
  2. S&P 500 Average Return: 5-year, 10-year, 20-year, 30-year
  3. S&P 500 Average Return: 5-year, 10-year, 20-year, 30-year
  4. Average Market Return for the Last 5 Years
  5. Average Market Return for the Last 10 Years
  6. Average Market Return for the Last 20 Years
  7. Average Market Return for the Last 30 Years
  8. What Is a Stock Market Return?
  9. Factors That Impact the Stock Market
  10. Measuring Growth in the Stock Market
  11. What Is a Good Yearly Return on Stocks?
  12. Why the S&P 500 Average Return Isn’t Always Average
  13. Dot-Com Bubble
  14. Financial Crisis of 2008
  15. Market Recovery
  16. Future Stock Market Growth Predictions
  17. CONCLUSION

What Is the Average Stock Market Return?

Learning sharks stock market Institute

It’s critical for investors to comprehend typical stock returns and the potential implications for long-term portfolio growth. Based on the S&P 500, the overall average stock market return is about 10% each year; however, when inflation is taken into consideration, the actual return is more in the range of 6% to 7%.

 

It’s unusual for the stock market’s annual average return to be 10%. Only eight times in the nearly 100 years of data (1926 to 2021) was the average annual stock market return between 8% and 12%. Real stock market returns can be either larger or significantly lower.

 

This ongoing crisis in the stock market has a bright side. There is a potential that someone who loses thousands of dollars in the stock market will eventually make it up. To avoid losing money when the market has a terrible week, many experts advise hanging onto investments rather than switching to other stocks.

 

Yes, the investment might be a long-term endeavor. But how much profit can investors anticipate in a typical year or decade?

 

Before retiring, a lot of people want to know how much they stand to gain or lose. Every stock market investor should consider the stock market return, which is the amount they gain or lose over time.

S&P 500 Average Return: 5-year, 10-year, 20-year, 30-year

Typically, people don’t make stock market investments for only one year. Instead, they make long-term investments in the hopes that the investments they purchase today will be worth more when they decide to sell them in the future. To better comprehend stock price movement, it may be more beneficial to look at the average stock market return over the past 10, 20, and 30 years.

 

We may begin to obtain a sense of the typical market returns going back 5, 10, 20, and 30 years by looking at the S&P 500. Here are the last three decades’ average stock market returns, as determined by MoneyChimp.

Average Market Return for the Last 5 Years

The average stock market return over the last five years was 17.04% (13.64% when adjusted for inflation), according to S&P annual returns from 2017 to 2021. That exceeds the ordinary stock market average return of 10% by a wide margin. This number may have been even greater if the market hadn’t experienced early-2020 pandemic-related volatility.

Average Market Return for the Last 10 Years

Looking at the S&P 500 from 2012 through 2021, the average yearly return has been higher than the 10-year average return of 10%, at 14.83% (12.37% when adjusted for inflation).

 

The stock market underwent ups and downs over the course of the decade, but only 2015 and 2018 saw losses, and even those losses weren’t significant at 0.73% and 6.24%, respectively.

Average Market Return for the Last 20 Years

The average stock market return for the past 20 years, measured in terms of the S&P 500 from 2002 to 2021, is 8.91% (6.40% when adjusted for inflation).

 

During the first decade of 2000, the United States saw some significant lows and notable highs.

 

The market was performing extraordinarily well at the beginning of 2000, but from late 2000 to 2002, the dot-com bust caused losses for three straight years. The era following 9/11 in 2001 wasn’t helpful.

 

The financial crisis caused significant losses in 2008. The fact that the 20-year average stock market return is lower than the annual average is not at all surprising when these factors are taken into account.

 

Average Market Return for the Last 30 Years

The average return gets a little bit closer to the annual average of 10% when we add another decade to the mix. The average stock market return for the past 30 years, measured in terms of the S&P 500 from 1992 to 2021, is 9.89% (7.31% when adjusted for inflation).

 

The dot-com bubble in the late 1990s (before the crisis), which produced strong return rates for five straight years, can be partly blamed for this performance.

What Is a Stock Market Return?

A stock market return is a return on an investor’s investment in the form of a profit, dividend, or both. Knowing why the stock market varies might be useful in understanding stock market results.

 

According to a number of variables, including supply and demand, market mood, changes in revenue, and political difficulties, to mention a few, a company’s share price may rise or fall. The average rate of return on equities that a shareholder realizes can be influenced by all of these variables.

 

In a linked economy, seemingly unrelated financial issues, such as rising trade tariffs between two countries, can affect the valuation of some equities. Since the stock market is erratic, it can occasionally be affected by recent developments abroad and abrupt changes in the costs of commodities that are accessible to businesses and consumers in the US.

 

Investors may benefit from understanding the changes by using a specific stock as an example, such as an airline stock, and then applying what they learn to the entire stock market.

 

For instance, academics have claimed that listed firms’ market values decreased by $1.7 trillion as a result of the imposition of retaliatory tariffs on steel and aluminum imports from China to the US. Other analysts assert that over the course of a year, U.S.-China tariffs cost the typical American household $374.

 

Factors That Impact the Stock Market

The value of stocks and the typical return on investments for investors are influenced by a variety of factors.

 

Keeping with the airline example, some of the U.S. airline industry’s revenue comes from people choosing to pay for flights they do not necessarily need to take. The market may respond out of fear of future sales declines or worry about the rising cost of doing business when trade battles leave American consumers with less disposable income (i.e., certain taxed imports suddenly costing more). This is referred to as market sentimentality, and it can lower the value of a stock.

 

China retaliated by imposing tariffs on American goods after the U.S. raised import taxes on metals from China. A one-day loss of $1 trillion in the value of global stocks was caused by China’s 2019 declaration of retaliatory tariffs against the U.S., which would affect products like appliances, agricultural, construction, textiles, and rubber made in the United States.

 

The stock market as a whole may go up or down when the share values of numerous companies change concurrently. Shares of multiple large corporations may fall, and the public may lose confidence in the U.S. economy if a trade war impacts various companies’ foreign output or consumers’ capacity to spend domestically. Because of this, the market can decline. Some stocks may increase when import and export tariffs are removed because traders expect lower costs to be passed on to customers and enterprises.

 

Returns on the stock market are impacted by all of this volatility. People often inquire how much they will have gained (or lost) after a year, 10, 20, or 30 years when they wonder what their return will be. Despite the fact that each investor chooses their own companies and funds, looking at the average stock market return is a quick and easy approach to predict how much money they might make.

Measuring Growth in the Stock Market

How are stock market returns calculated? by examining the indexes. There are about 5,000 indexes that represent US stocks; an index is a collection of stocks that represents a segment of the stock market. The Dow Jones Industrial Average, Nasdaq Composite, and S&P 500 are the three most popular market indices, which investors may be familiar with.

 

The 500 largest publicly traded firms, including Microsoft, Apple, Amazon, Facebook, and Alphabet, are represented by the S&P 500 index. Its performance is seen as a good indicator of how the market is doing generally because it represents about 80% of the US stock market.

 

The S&P 500 is frequently used when discussing the stock market and the average stock market return.

What Is a Good Yearly Return on Stocks?

It’s crucial to be realistic when discussing the typical rate of return on equities and what you can anticipate. As previously stated, the typical stock market return tends to be around 10%, but when inflation is taken into account, returns are typically closer to 6%.

 

Using the 6% number as a starting point, an investor may decide to build a portfolio that is intended to provide returns at that rate. You’re more likely to see stock market returns that are in the average or normal range if you have investments in funds that follow the S&P 500. Anything above 6% may be viewed as the cherry on top.

 

An investor seeking above-average stock market returns may decide to develop their portfolio more aggressively, looking at actively managed funds or momentum trading, for example, in an effort to take advantage of higher return potential. However, those tactics may carry more risk, and as always, there is no assurance that an investor would outperform the market. Additionally, paying greater expense ratios or charges due to active trading may reduce investment gains.

 

An investor may experience consistent returns over time by employing a buy-and-hold strategy and continuing to invest through market ups and downs. For instance, with dollar-cost averaging, investments would be made regardless of how high or low stock prices rose or fell. They might not outperform the market in this manner, but they would be able to ride the waves of the market as stock market returns rose or fell.

 

An investor who adopts this mindset will be less likely to panic and sell when market turbulence arises. This is crucial since timing your exit or entry into the market incorrectly could have a major influence on your portfolio’s overall return profile.

Why the S&P 500 Average Return Isn’t Always Average

Because outliers can skew the yearly average, the annual average of 10% is not a good predictor of stock market returns for a given year. Outlier years are years where the return is significantly greater or lower than average.

 

When compared to the return over the previous 10 years, which was 14.83%, the average stock market return over the past 20 years, for instance, may look modest at 8.91%. But from 2000 to 2009, not every year was awful for the stock market. In actuality, the average return in 2003 was 26.38%, while in 2009, it was 23.45%. However, there were unfavourable outliers that had an impact on the 20-year average.

Dot-Com Bubble

Outliers in the stock market are perfectly illustrated by returns from 2000 to 2009. The dot-com bubble, which erupted in the late 1990s, saw a boom in the number of technology and web-based businesses. Investors began selling their shares in a frenzy in 2000 as a result of massive “sell” orders issued on their stocks by businesses like Cisco and Dell.

 

The market lost money every year for three years during this time, which is frequently referred to as the “dot-com bust.” Average yearly losses were 10.14 percent in 2000, 13.04 percent in 2001, and 23.3 percent in 2002.

Financial Crisis of 2008

The 2008 financial crisis is a further illustration of an outlier. For many years, banks have provided atypical loans to people with poor credit and low incomes so they can purchase homes. As more people purchased homes, housing costs skyrocketed. People were no longer able to afford their homes, which created difficulties for the lenders.

 

In September of that year, the Fed presented a bank bailout measure, but Congress rejected it, causing a market crash. Although the legislation was passed by Congress in October, the stock market damage was not immediately repaired. The market return was down a staggering 38.49% in 2008.

Market Recovery

The 2008 financial crisis and the dot-com crash are two prominent examples of outliers that have reduced stock returns more than typical. However, the stock market skyrocketed in the years that followed these unfavorable exceptions.

 

In late 2003, the dot-com bust-related panic and other tensions began to subside, and the market returned 26.38% for the year. Up until the 2008 financial crisis, annual average returns remained in an upward trend for four more years.

 

Following the 2008 market meltdown, the market recovered in 2009 with a return of 23.45% and then kept growing for the following six years. The first decline occurred in 2015, however, it only decreased by 0.73%.

 

Strong increases—even if they aren’t huge—and successive annual gains frequently come after sharp declines. When share prices began to fall in 2008, anyone who panicked and sold their stocks undoubtedly suffered significant financial losses. But by 2012, when market returns had finally improved enough to counterbalance how much the market had lost in 2008, individuals that hung onto their investments presumably saw an improvement in their incomes.

 

It may be wise to keep the big picture in mind when the stock market faces a negative aberration.

Future Stock Market Growth Predictions

When the stock market performs poorly, as it did during the dot-com crash and financial crisis, we may observe that it eventually recovers. The stock market will eventually slow down and suffer a loss if it performs very well. This can aid in balancing out investors’ average stock return.


According to the commonly established rule, if an investor’s rate of return is low right now, they can anticipate that it will be high in the future; if it is high right now, they can anticipate that it will be low. In the past, the market has maintained equilibrium and expanded favorably overall. Returns on the stock market rise around 70% of the time.

 

A stock market correction occurs when share prices reach their peak and subsequently decline by 10% or more. Investors can wager that the market will correct itself by dropping if it is doing well.

 

There is no way to guarantee a given stock market return at all, much less over a specific period of time, as all investments carry risk. It can be challenging to anticipate a stock’s performance with accuracy because many factors influence stock performance. And it is completely false to believe that investors can time the stock market to optimise gains.

CONCLUSION

Although the U.S. stock market returns 10% on average each year, there are certain limitations to that figure.

 

Realistically, when inflation is taken into consideration, that number is closer to 6% to 7%. Additionally, a 10% stock market return occurs only occasionally; the figure represents an average rather than the norm. Some years are higher than others, and vice versa.

 

Some investors might find it enjoyable to follow the stock market’s ups and downs. Others could have anxiety when attempting to decide when their stocks are at an all-time high or are going downhill. Each investor has their own unique style. Members can choose between active and automated investing with SoFi Invest® to choose the investing approach that suits them best.

 

For those who prefer a hands-on approach, active investing is for you. They are free to trade and check their stocks online as they like. A hands-off approach is preferred by those who use automated investing. The SoFi Invest® app allows them to enter their objectives, and SoFi handles the rest.

Stock Market Research

by
Learning sharks stock market Institute stocK

Topics Covered

  1. Bond Market vs. Stock Market: What’s the Difference?
  2. Bond Market vs. Stock Market: An Overview
  3. KEY TAKEAWAYS
  4. The Bond Market
  5. Where Bonds Are Traded
  6. Who Participates in the Bond Market?
  7. Bond Ratings
  8. The Stock Market
  9. The Prominent U.S. Stock Exchanges
  10. CONCLUSION

Bond Market vs. Stock Market: What's the Difference?

Bond Market vs. Stock Market: An Overview

Now is the moment to make an investment. So, how precisely are you planning to spend that cash? After all, before you begin to purchase assets such as stocks and bonds, a well-diversified portfolio approach is advised. In fact, stocks and bonds are two of the most traded asset classes, each of which can be purchased through a variety of platforms, marketplaces, or brokers. Additionally, there are significant, fundamental distinctions between stocks and bonds.

KEY TAKEAWAYS

  • Investors can trade equity securities (such as shares) issued by firms on a stock market.
  • Investors can purchase and sell debt instruments issued by governments or firms on the bond market.
  • Bonds are often sold over the counter rather than in a centralized place, while stocks typically trade on a variety of exchanges.
  • The two most well-known stock exchanges in the United States are Nasdaq and the New York Stock Exchange (NYSE).

The Bond Market

Investors transact (buy and sell) debt securities, most notably bonds, issued by firms or governments on the bond market. The debt or the credit market are other names for the bond market. All of the securities offered on the bond market are different kinds of debt. You are lending money for a predetermined time period and charging interest when you purchase a bond, credit, or debt security, just like a bank does to its borrowers.

 

Investors can receive a consistent, albeit small, stream of regular income from the bond market. Investors in certain securities, such as Treasury bonds issued by the federal government, get interest payments every two years. In order to save money for their children’s school, their retirement, or other long-term goals, many investors decide to include bonds in their portfolios.

 

Investors can learn more about bonds using a variety of research and analytical tools. One resource that breaks down the fundamentals of the market and the various kinds of securities accessible is Investopedia. The Bond Center on Yahoo! Finance, and Morningstar are further resources. They offer current information, news, research, analysis, and analysis. Through their brokerage accounts, investors can also access more particular information on bond offerings.

Where Bonds Are Traded

Because there is no central place for trading in the bond market, most bonds are sold over the counter (OTC). As a result, retail investors rarely engage in bond market activity. Large institutional investors like pension funds, foundations, and endowments, together with investment banks, hedge funds, and asset management companies, are some of those who do. Bonds can be purchased by individual investors through a bond fund that is overseen by an asset manager. Individual investors can now also access corporate bond issuance, Treasuries, munis, and CDs directly through several brokerages.

 

The primary market is where new securities are offered for sale, and the secondary market is where investors buy and sell securities they already own. These fixed-income securities include bonds, notes, and bills. Issuers can obtain the cash they require for projects or other necessary expenses by offering these securities on the bond market.

Who Participates in the Bond Market?

The following are the three principal parties active in the bond market:

Issuers: Whether corporations or various tiers of government, they are the organizations that create, list, and sell securities on the bond market. Consider the U.S. Treasury issues Treasury bonds, which are long-term investments with 10-year maturities and bi-annual interest payments for investors. investing in specific bond market segments, such as U.S. Treasury securities is regarded as less risky than stock market investments, which are more volatile.

 

Underwriters: In the financial industry, underwriters typically assess risks. An underwriter purchases securities from issuers in the bond market and resells them for a profit.

 

Buyers and sellers of bonds and other similar instruments are these companies. Through the purchase of bonds, the participant makes a loan for the duration of the security and is paid interest. The bond’s face value is returned to the participant when it matures.

Bond Ratings

Bond rating companies like Standard & Poor’s and Moody’s typically assign bonds an investment grade. This rating, which is represented by a letter grade, informs investors of the default risk associated with a bond. A bond with a rating of “AAA” or “A” is high-quality, but a bond with a rating of “A” or “BBB” is medium risk. Bonds rated BB or lower are regarded as high-risk investments.

The Stock Market

Investors can trade derivatives, such as options and futures, as well as equity securities, such as ordinary stocks, on a stock market. On stock exchanges, stocks are traded. Purchasing equity securities, sometimes known as stocks, entails purchasing a relatively modest ownership part of a business. Bondholders lend money with interest, but equity investors buy minor ownership in businesses in the hope that if the firm does well, the value of the shares they have bought would rise.

 

The main goal of the stock market is to bring buyers and sellers together in an atmosphere that is fair, regulated, and monitored so that they may carry out their transactions. This instills confidence in individuals involved that trading is carried out transparently and that prices are reasonable and honest.

 

The stock market is divided into two parts, just like the bond market. First-run stocks are only permitted on the primary market, where initial public offerings (IPOs) will be made. Underwriters, who determine the initial price for securities, help to facilitate this market. The secondary market, where the majority of trading occurs, is then opened up for equities.

The Prominent U.S. Stock Exchanges

The well-known stock exchanges in the United States include:

Nasdaq is a worldwide electronic exchange that lists the securities of local companies with modest market capitalizations. Although the majority of the index is made up of technology and financial equities, it also contains consumer goods and services, healthcare, and utilities. The benchmark index for the US technology sector is likewise based on this exchange.

 

According to the overall market value of the securities it lists, the New York Stock Exchange (NYSE) is the biggest exchange in the entire world. The NYSE is home to many of the biggest and oldest publicly traded businesses. The Intercontinental Exchange (ICE) most recently acquired the NYSE in 2013 after a series of mergers.

 

The Dow Jones Industrial Average (DJIA), one of the oldest and most closely followed indexes in the world, is made up of thirty of the largest businesses listed on the NYSE.

 

American Stock Exchange (AMEX), which the NYSE Euronext purchased in 2017 and rebranded as the NYSE American.

 

It was first recognized for trading and launching new goods and asset classes. Additionally, the exchange was the first to release an ETF. The exchange trades largely small-cap equities electronically.

 

The United States controls these markets. Commission for Securities and Exchange (SEC).

CONCLUSION

The stock market features central hubs or exchanges where stocks are traded, which is a key distinction between the bond and stock markets.

 

The other key difference between the stock and bond market is the risk involved in investing in each. Investors may be exposed to risks when it comes to stocks, including currency risk, liquidity risk, interest rate risk, and country or geopolitical risk (based on where a company conducts business or is based). These risks can have an impact on a company’s debt, cash on hand, and bottom line. As opposed to stocks, bonds are more vulnerable to hazards like inflation and interest rates

 

When interest rates rise, bond prices tend to fall. You might receive less than the purchase price if you have to sell your bond before it matures due to high-interest rates. If you buy a bond from a company that isn’t financially sound, you’re opening yourself up to credit risk. In a situation like this, the bond issuer finds itself vulnerable to default since it is unable to make the interest payments.

 

The S&P 500 and Dow Jones Industrial Average are two indexes that can be used to broadly measure stock market performance. Similar to this, investors can monitor the performance of bond portfolios by using bond indexes like the Barclays Capital Aggregate Bond Index.

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How can you become a stock market expert

by
expert in Learning sharks Stock market.

Consistent reforms in the Indian stock market, particularly in the secondary market, have resulted in modern technology and online trading, transforming the stock exchange. In the face of current turmoil and pessimism, Indian capital markets are poised as a fast-growing emerging market economy.

 

The Indian stock market has undergone structural transformations over the years, and it now compares favourably with those in developed markets. The development of stock markets reflects the growth of the capital market. Positive indicators include a consistent 8-9 percent annual growth rate, a GDP of $11.04 trillion, rising foreign exchange reserves of over US$ 513 billion, and a thriving capital market with the popular ‘Sensex’ index surpassing the majestic 36,000 mark. The Indian stock markets are becoming a popular destination for foreign investors.

 

So, if you want to become a stock market expert and maximize your returns, the BSE Institute has a course for you. Please read on for more information.

 

Steps to becoming an expert investor

We are all aware that investing in equities is the key to accumulating long-term wealth and becoming wealthy. It is important to remember, however, that not all stocks are created equal. While mid- and small-caps have the potential to generate high returns, large caps provide portfolio stability. This is not to say that you should ignore any of these stocks.

 

As a result, it is critical that you benefit from the high growth offered by mid-and small-cap stocks while also enjoying the stability offered by large caps.

 

Be strict with your stop loss. It means that if you are losing money, you should cut your losses and exit the market. Similarly, if you are on a winning streak, putting a proper stop loss in place will protect your profits if the stock markets begin to fall.

 

Learn whenever you suffer a loss. We lose money in the market as a result of our errors. Find out what went wrong and make sure it doesn’t happen again.

 

Avoid greed. It is all too easy to invest in a bad stock simply because it is rising in value. You might be in a hurry to make some quick cash for a down payment on a home loan or a down payment on a new car about to hit the streets. However, be cautious and keep in mind that this price increase is the result of market manipulation rather than any genuine change in the company’s financial situation. Also, keep in mind that in order to reap the most benefits, you must remain invested in a good stock for the long term.

 

Avoid leveraging. Many people take out large loans from others in order to maximise their profits. Though this may work in some cases, it can also result in massive losses if the market cycle turns. This can cause financial and mental stress, as well as the destruction of family lives and, in extreme cases, suicide.

 

Don’t act if you are not sure which way the stock markets will move. In such cases, it is preferable to remain a spectator rather than participate in market activity.

 

Read a lot. There are numerous good books on investing available. Always keep your knowledge up to date. Follow the thoughts and opinions of respected investors such as Warren Buffet, Rakesh Jhunjhunwala, and others. It will broaden your knowledge and prepare you to deal with any market situation with ease.

 

Limit the number of stocks. Make sure your portfolio contains no more than 20 stocks. To protect your portfolio’s value, make sure these stocks are from companies that operate in a variety of industries.

 

Don’t use various investment strategies. If you are comfortable with the buy and hold strategy, apply it to all of your stocks. Otherwise, you may be perplexed about which strategy actually helps you make money.

Remain patient and disciplined, Whatever the market conditions If the markets are falling, don’t get out; instead, wait for the market to rise. Also, don’t keep investing in the stock just because it’s rising in value.

 

Choose stocks as per your risk profile instead of the returns they generate. Do not invest in small- and mid-cap stocks if you are not comfortable with their high volatility.

 

 

Harsha Engineers Limited IPO

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News alert

Harsha Engineers International Ltd IPO

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IPO date14 Sep 2022 – 16 Sep 2022
Listing date26 Sep 2022
Price range314 – 330
Minimum order quantity45
(D)RHPView

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The company Harsha Engineers Limited produces precision bearing cages. It provides a broad range of precision engineering products for various end-user industries and geographical markets.

 

Harsha Engineers is active in two industry sectors:

 

Bearing cages, intricate and unique precision stamped components, welded assemblies, brass castings, cages, and bronze bushings are all produced by the engineering company.

 

The company’s solar EPC (Engineering, Procurement, and Construction) division offers complete turnkey solutions for all solar photovoltaic needs.

Customers can purchase the company’s goods in over 25 nations across five continents: North America, Europe, Asia, South America, and Africa. And as of CY 2020, the company owned 5.2% of the market share and about 50% of the market share in the organised section of the Indian bearing cages industry.

 

Harsha Engineers hopes to raise up to Rs. 755 crores through the public offering. The issue consists of a new equity share issue of up to Rs. 455 crores and an offer for sale of equity shares worth Rs. 300 crores from current shareholders.

Financial Snapshot

Financial Year EndedRevenue (₹ Crores)PAT (₹ Crores)EPS (₹)
March 2019117.91-27.41-13.7
March 2020899.5121.9093.52
March 2021876.7345.4395.88
September 2021637.6343.7075.66

IPO Schedule

Issue Period14th September to 16th September 2022
Finalization of Allotment21st September 2022
Initiation of Refunds22nd September 2022
Credit of Shares23rd September 2022
Date of Listing26th September 2022
Mandate end date2nd October 2022
Anchor Investors Lock-In End Date16th October 2022

Key Points

Strengths

1. Comprehensive solution provider offering diversified suite of precision engineering products across geographies and end-user industries
2. Long standing relationships with leading clientele
3. Strategically located domestic and international production facilities and warehouses
4. Expertise in Tooling, design development and automation

Risks

1. Depend on a limited number of customer groups for a significant portion of its revenue from engineering business
2. Inability to maintain relationships with its network of agents for fulfilment of needs of the customers or deficiency in the service provided by such agents may adversely affect the business
3. Any failure to obtain, renew or comply with necessary regulatory approvals and licenses may adversely affect the operations
4. The company and certain of its subsidiaries have unsecured loans that may be recalled by the lenders at any time
5. It also has certain contingent liabilities, which, if they materialize, may adversely affect the financial condition

Highlights of the Harsh engineers international

Harsha Engineers International, Ahmedabad based company, is the largest manufacturer of precision bearing cages, in terms of revenue, in organized sector in India, and amongst the leading manufacturers of precision bearing cages in the world. The company manufactures complex and specialised precision stamped components, welded assemblies, brass castings and cages & bronze castings and bushings.

 

The company’s products cater to sectors including automotive, aviation & aerospace, railways, construction, mining, renewable energy, agriculture and other industrial sectors, and offers a wide range of bearing cages starting from 20 mm to 2,000 mm in diameter.

 

The company commands approximately 50% of the market share in the organised segment of the Indian bearing cages market and 5.2% of the market share in the global organised bearing cages market for brass, steel and polyamide cages in 2020.
It is also an EPC service provider in the solar photovoltaic industry and also provides operations and maintenance services in the solar sector with over 10 years of operating history in the solar EPC business.

 

The company has five manufacturing facilities with two of its principal facilities at Changodar and one at Moraiya, near Ahmedabad in Gujarat, and one manufacturing unit each at Changshu in China and Ghimbav Brasov in Romania, which allow access to its customers in over 25 countries in North America, Europe, Asia, South America and Africa.

Competitive Analysis/ Market Peers

learning sharks stock market Institute

FAQS

The lot size of the Harsha Engineers IPO is 45 shares per lot. A retail investor can make a minimum investment of Rs. 14850 (1 Lots at Rs. 330) and a maximum of Rs. 1,93,050 (13 lots at Rs. 330).

The issue opens on 14TH September and closes on 16th September.

Promoters of Harsha Engineers include Sandeep Rajendra Shah, Harish Rangwala, Vishal Rangwala and Pilak Shah.

The IPO will be listed on 26TH September.

The proceeds from the issue will be used as follows:
1. Rs.270 crores for debt payment
2. Rs.77.95 crores for funding working capital requirements towards the purchase of machinery
3. Rs.7.12 crore for infrastructure repairs and renovation of the existing production facilities and general corporate proposes

The price band is set at Rs. 314 on the lower band and Rs. 330 on the upper band.

The Harsha Engineers IPO issue comprises of a fresh issue of equity shares worth Rs.455 crores, and an offer for sale (OFS) of up to Rs.300 crores by existing shareholders.

How do I apply to the Harsh engineers international?

You can apply for the Harsh engineers internationa IPO using any supported UPI app by following two steps:

  • Enter your bid on Kite
  • Accept UPI mandate on your phone

On acceptance of the mandate, the bid amount will get blocked in your bank account.

Where can I find the Harsh engineers international IPO's allotment status?

You can check the allotment status for the Harsh engineers internationa IPO on the website of the Registrar and Transfer agent.

Alternatively, you can also check the allotment status on the NSE website.

Stock Market Efficiency

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Topics Covered

  1. What Is Market Efficiency?
  2. KEY TAKEAWAYS
  3. Market Efficiency Explained
  4. Differing Beliefs of an Efficient Market
  5. CONCLUSION

What Is Market Efficiency?

Stock Market Efficiency learning sharks

The degree to which market prices accurately reflect all available, pertinent information is referred to as market efficiency. There is no way to “beat” the market if markets are efficient since there are no assets that are undervalued or overvalued because all information is already factored into prices.

 

The phrase was coined by economist Eugene Fama in a 1970 paper, however, Fama admits that the phrase is a little deceptive because no one is really certain how to define or measure this concept of market efficiency. Despite these restrictions, the phrase is used to refer to the efficient market theory, which is what Fama is most famous for (EMH).

 

According to the EMH, it is impossible for an investor to outperform the market, and market anomalies shouldn’t exist since they would be quickly arbitraged away. For his contributions, Fama later received the Nobel Prize. Investors that embrace this notion frequently invest in index funds that follow the performance of the entire market and advocate for passive portfolio management.

 

The ability of markets to absorb information that gives buyers and sellers of securities the greatest number of opportunities to execute transactions without raising transaction costs is the essence of market efficiency. Academics and practitioners disagree sharply on whether or to what extent markets, including the U.S. stock market, are efficient.

KEY TAKEAWAYS

  • Market efficiency is the degree to which current prices accurately represent all pertinent and available information regarding the true worth of the underlying assets.
  • Since all information that is available to traders is already factored into the market price, a truly efficient market makes it impossible to outperform the market.
  • The market becomes more efficient as the quality and quantity of information rise, lowering prospects for arbitrage and above-market gains.

Market Efficiency Explained

Three levels of market efficiency exist. Because it is impossible to accurately estimate future prices based on historical price changes, market efficiency is weak. If current prices take into account all relevant information that is currently known, then all knowledge that can be learned from past prices is already taken into account by current prices. Future price changes can only result from the availability of fresh information, therefore.


According to this version of the hypothesis, it is not reasonable to anticipate that investing techniques like momentum or any rules based on technical analysis will consistently produce above-average market returns. This version of the hypothesis still leaves open the potential that by employing fundamental analysis, excess returns could be obtained.

 

The semi-strong form of market efficiency assumes that stocks quickly adjust to taking in new information that is made public, making it impossible for an investor to outperform the market by trading on that knowledge. Because any knowledge gleaned from the fundamental analysis will already be available and hence already incorporated into current pricing, it follows that neither technical analysis nor fundamental analysis would be trustworthy tactics to attain greater returns. To acquire a trading advantage, only private information that is not available to the general market will be relevant, and only to those who have it before the rest of the market does.

 

The strong form of market efficiency, which builds on and incorporates the weak form and the semi-strong form, claims that market prices reflect all information, both public and private. Assuming that stock prices represent all information, both public and private, no investor, including a company insider, would be able to gain an advantage over the average investor even if he had access to fresh insider knowledge.

 

Differing Beliefs of an Efficient Market

The strong, semi-strong, and weak forms of the EMH show the vast range of opinions held by academics and investors regarding the market’s actual efficiency. Strong form efficiency proponents concur with Fama, and they frequently include passive index investors. Active trading can produce anomalous profits through arbitrage, according to proponents of the weak version of the EMH, whereas semi-strong believers fall somewhere in the middle.


Value investors, for instance, are at the other end of the spectrum from Fama and his adherents and hold the opinion that stocks can become undervalued or priced below what they are really worth. By buying stocks when they are undervalued and selling them when their price increases to match or above their real worth, successful value investors can profit.

 

People who reject the idea of an efficient market emphasise the existence of active traders. There should be no incentive to become an active trader if there are no opportunities to make profits that outperform the market. Furthermore, because the EMH states that an efficient market has minimal transaction costs, the fees levied by active managers are considered as evidence that the EMH is incorrect.

CONCLUSION

Despite the fact that some investors support the EMH on both sides, there is concrete evidence that greater financial information dissemination has an impact on stock prices and improves market efficiency.

 

For instance, with the adoption of the Sarbanes-Oxley Act of 2002, which mandated increased financial openness for publicly traded corporations, equities market volatility decreased. Financial statements were discovered to be more credible, increasing the information’s dependability and boosting confidence in a security’s stated price. The reactions to earnings announcements are lessened since there are fewer surprises.

 

This alteration in volatility pattern demonstrates how the market became more effective after the Sarbanes-Oxley Act was passed and its information requirements. This supports the EMH by showing that enhancing the accuracy and dependability of financial accounts can reduce transaction costs.

 

Other instances of efficiency occur when alleged market irregularities become well-known and then vanish. For instance, in the past, when a stock was first added to an index like the S&P 500, its share price would increase significantly only because the stock was now a component of the index, regardless of any new developments in the company’s fundamentals. This index effect anomaly was extensively noticed and made public as a result, and it has since mostly vanished. Thus, as information improves, markets become more effective and anomalies become less common.

Difference between Stock Market and Stock Exchange

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Difference between Stock Market and Stock Exchange

Stock vs market share

People typically invest in the financial sector in order to earn a little bit more money. As a result, they are unfamiliar with money market terminology. Terms like “share,” “stock,” and “equity” are challenging for a novice to comprehend. But not knowing anything clearly can be problematic.

 

Before starting to invest, an investor should be conversant with these words. It makes sense to invest intelligently if you understand what they mean. In this post, we will discuss the differences between the stock market and the share market. The distinction between the stock market and the share market may not always be clear to a novice investor. They experience blurred vision as a result. First, let’s dissect the phrases to determine their individual meanings.

 

Table of Contents   
1 What are shares?
2 What is stock?
3 What are the basic differences between stock and shares?
4 What is the impact on dividend and voting rights?
5 Conclusion
6 FAQs
Learning Sharks

What are shares?

People typically invest in the financial sector in order to earn a little bit more money. As a result, they are unfamiliar with money market terminology. Terms like “share,” “stock,” and “equity” are challenging for a novice to comprehend. But not knowing anything clearly can be problematic.Before starting to invest, an investor should be conversant with these words. It makes sense to invest intelligently if you understand what they mean. In this post, we will discuss the differences between the stock market and the share market. The distinction between the stock market and the share market may not always be clear to a novice investor. They experience blurred vision as a result. First, let’s dissect the phrases to determine their individual meanings.

learning sharks

What is stock?

When it comes to stocks, the word literally means a group or aggregate of something. Stocks are the collection or accumulation of a company’s shares, to put it in the context of a company’s holdings. Stocks reflect the percentage of a company that a person, whether an individual or not, owns. Although a firm can only issue a certain number of shares, an individual can own an unlimited number of shares in their portfolio. It can be a component of the person’s portfolio and be a part of one or more companies, as was previously described.


To further comprehend the idea of stocks, let’s use the aforementioned example once more.

 

For example 100 shares of Company A are held by Mr. X. There are 1000 shares in all that the corporation has issued. This indicates Mr. X. holds 10% of the company’s stock. Furthermore, if Mr. X also owns 200 shares of Company B, with a total of 4000 shares, he owns 5% of Company B, making his overall holdings in his portfolio 10% of Company A and 5% of Company B.

 

learning sharks

What are the basic differences between stock and shares?

After understanding the basic meaning of the two terms shares and stocks, let us not consider the basic differences between the two. 

CategoryStockShares
MeaningShares represent the ownership of the person in a particular company. Stocks represent the ownership or the share of the person in one or more companies. 
Original issueStocks do not form part of the original issue by any company. After the issue of shares, they are converted to stocks.Shares form part of the original issue by any company. 
Nominal valueStocks do not have a nominal value attached to themShares have a nominal value that is allotted to every share of the company. 
TransferStocks are a bundle of shares. Hence, it is possible to transfer them in fractions. or smaller portions. Shares of a company can be transferred in lots but not in fractions.
Maximum numberThere is no limit to the maximum stock that can be held by a person in their portfolio. Stocks can be from one or multiple companies hence, for investors, the sky’s the limit when it comes to accumulating stocks. When a company issues shares, they are in a definite quantity. Hence, there is a ceiling on the maximum number of shares of a company that can be held by any person whether (individual or not). 
Paid-up valueShares can be converted to stocks only when they are fully paid. Hence, stocks are always fully paid upShares, on the other hand, can be fully paid up or partly paid.
TypesStocks are usually of two broad categories – Common stock and preferred stock. These stocks can be further classified as a growth stock, value stock, income stock, blue-chip stocksShares can be of a private company or a public limited company. These shares are broadly categorized as common shares or equity shares and preference shares. Such shares can further be fully paid or partly paid shares. 
DenominationStocks held by an investor can be of different companies and hence can have different denominations Shares of a company have the same denomination irrespective of the times they are issued. The only change in the denomination of the shares is in the case of splitting of shares.
Learning sharks rights

What is the impact on dividend and voting rights?

Having stock in a corporation also entitles you to dividends and the ability to vote. A shareholder’s voting and dividend rights increase with the number of shares they own. The voting rights are typically not changed when these equities are converted to stocks. A private limited company may, however, issue various classes of shares for the general public and promoters, with each of the promoters’ shares potentially having a larger voting right than ordinary shares, or a private limited company may be converted to a listed corporation.

Conclusion

Shares and stocks refer to different things. However, one of these is frequently substituted for the other. It is nonetheless crucial to comprehend the fundamental distinctions between them in order to better grasp the markets and their intricacies, even though it typically does not lead to any significant misunderstanding or grave errors (particularly for small investors) in understanding an investment.

Learning sharks Stock market Institute

FAQS

What are the common ways to earn money in stock markets?

The most common ways of earning money from the stock markets are by selling the shares at a profit (capital gains) or through dividends declared by the company on the shares.

 What is the key to having a profitable portfolio?

The key to having a profitable portfolio is by investing in fundamentally strong stocks and having a diversified portfolio. Investors should also aim at a long-term investment horizon to reap maximum benefits.

What are blue-chip stocks?

Blue-chip stocks are the stocks of companies that are usually the market or segment leaders and have consistently performed well over decades.

What are preference shares?

Preference shares are a class of shares issued by the company that has a preferential right of dividend as well as at the time of liquidation of the company. These shares, however, do not have any voting rights.

Stock Market World Markets

by

Topics Covered

  1. WORLD MARKET NEWS
  • 1. An $83 billion investor stampede shows the scale of Europe’s woes
  • Oil prices surge 4% on supply cut threats, still set for a weekly drop
  • Gold gains as dollar dip staves off some pressure from rate hike prospects
  • Stocks rise as tech, growth shares lead; the 2-year US yields at 14-year highs

WORLD MARKET NEWS

Stock World Market

1. An $83 billion investor stampede shows the scale of Europe's woes

Europe’s woes have grown particularly acute in recent months as the region stares down the threat of a recession just as its central bank embarks on an aggressive campaign to tame inflation

 

A looming recession that could last longer than any experienced by Americans, war, and winter of energy restrictions. A suddenly hawkish ECB, too, oh yeah. Nobody knows how Europe will get out from under its pile of problems, and investors aren’t waiting around to find out.

 

According to figures cited by Deutsche Bank AG from EPFR Global, money managers pulled $3.4 billion from European stock funds in the week ending September 7, bringing the six-month total of outflows to $83 billion. Amundi SA, the biggest asset manager in the area, and BlackRock are two of those leaving. The year-end expectations for the Stoxx 600 and Euro Stoxx 50, respectively, were drastically reduced by analysts at Bank of America Corp. and JPMorgan Chase & Co.

 

Europe’s problems have gotten worse recently as the continent faces the possibility of a recession and its central bank launches an aggressive battle to control inflation. An energy crisis that could result in rationing this winter is being exacerbated by Russia’s weaponization of gas supply to the West.

 

It’s already causing financially constrained governments—some of which have a debt to GDP ratios of about 150%—to go deeper into their budgets in order to find hundreds of billions of dollars to pay for suggested price ceilings. The common currency continues to plunge to levels against the dollar that have not been seen in twenty years.

 

Given the oil crisis, “we’ve anticipated a recession in Europe for months, but we don’t think equities have fully priced this in,” said Wei Li, BlackRock’s global chief investment strategist based in London.

 

In fact, the MSCI World Index and the US benchmark are outperformed by Europe’s primary stock index in 2022, which benefits from a competitive export environment and a strong second-quarter results season.

Oil prices surge 4% on supply cut threats, still set for weekly drop

Reuters: NEW YORK On Friday, oil prices increased by around 4%, helped by actual and threatened supply cutbacks. However, futures showed a second weekly fall as the prospect of demand was hampered by aggressive interest rate hikes and China’s COVID-19 limitations.

 

A minor reduction in OPEC+ oil output plans revealed this week also helped to maintain prices. Russian President Vladimir Putin has threatened to restrict oil and gas supplies to Europe if price caps are implemented.

 

A barrel of Brent crude increased by $3.69, or 4.1%, to close at $92.84. The U.S. To reach a price of $86.79 per barrel, West Texas Intermediate (WTI) crude increased by $3.25, or 3.9%.

 

According to Stephen Brennock of oil broker PVM, “the West will have to deal with the possibility of losing Russian energy supplies and rising oil prices over the next months.”

 

Brent is down significantly from a rise in March close to its all-time high of $147 when Russia invaded Ukraine, pressured by concerns about a recession and demand.

 

In the wake of the invasion, the Group of Seven is looking for methods to restrict Russia’s significant oil export earnings. Russian oil should be subject to a price cap set at fair market value less any risk premium brought on by Moscow’s invasion of Ukraine, a U.S. official said. An official from the Treasury Department informed reporters on Friday.

 

Despite the recovery on Friday, both crude benchmarks were still expected to decline for the week, with Brent down roughly 0.2% for the week after briefly reaching its lowest level since January. WTI reported a 0.1% weekly drop.

 

According to Fed Governor Christopher Waller on Friday, if the US Federal Reserve can keep the unemployment rate at 5%, it can be aggressive in bringing down inflation, but after that, tradeoffs will become apparent.

While the economy “can take a blow,” the Fed should be aggressive with rate hikes, he said.

 

The White House is not currently exploring any releases from the U.S. Strategic Petroleum Reserve (SPR) beyond the 180 million barrels that President Joe Biden declared months ago, according to a U.S. Department of Energy official. The administration was debating whether or not to carry out additional SPR releases, Energy Secretary Jennifer Granholm earlier told Reuters.

 

The White House is delaying yet another SPR release, according to Price Futures Group analyst Phil Flynn. Looks like the market is no longer experiencing many of its prior worries.

 

According to energy services company Baker Hughes Co., the number of U.S. oil rigs dropped by five this week to 591, the lowest number since mid-June, as output growth has stalled despite relatively high energy prices.

 

Prices have also been impacted by the unexpected 75 basis point rate increase by the European Central Bank this week and additional COVID-19 lockdowns in China.

 

On Thursday, the majority of Chengdu’s more than 21 million residents were placed under lockdown, and authorities in other parts of China advised millions more people to avoid traveling over the impending holidays.

 

In the week ending September 6, the money managers reduced their net long positions in U.S. crude futures and options by 3,274 contracts, to 165,158. According to the Commodity Futures Trading Commission (CFTC),

 

(Editing by David Gregorio and Alistair Bell; reporting by Stephanie Kelly in New York; additional reporting by Alex Lawler in London, Sonali Paul in Melbourne, and Jeslyn Leah in Singapore)

Gold gains as dollar dip staves off some pressure from rate hike prospects

By 1:55 p.m., spot gold increased 0.5% to $1,716.30 per ounce. ET (1755 GMT), having earlier in the day reached its highest level since August 30. U.S. gold futures ended the day at $1,728.6 up 0.5%.

 

Gold increased on Friday as the possibility of further interest rate hikes seemed to be temporarily alleviated by the dollar’s decline.

 

By 1:55 p.m., spot gold increased 0.5% to $1,716.30 per ounce. ET (1755 GMT), having earlier in the day reached its highest level since August 30. U.S. gold futures ended the day at $1,728.6, up 0.5%.

 

The price of gold was expected to increase 0.3% for the week, marking its first weekly increase in four.

 

“Overnight, the U.S. dollar index significantly fell, which helped the gold and silver markets. Seeing some short-covering as well as the weekend approaches in the futures markets “Jim Wyckoff, a senior analyst at Kitco Metals, made a statement.

 

Dollar-priced bullion is now more affordable for foreign customers because the dollar has fallen to a more than one-week low against its competitors.

 

The decline in exchange-traded funds (ETFs) in the gold market and the weakening trading volumes on U.S. futures markets, however, indicate that the upward movement is unlikely to be sustained, according to independent analyst Ross Norman. [GOL/ETF]

 

Following recent hawkish remarks from Fed Chair Jerome Powell that solidified expectations of a significant rate hike, investors are now anticipating the release of August U.S. inflation data early next week.

 

According to Edward Moya, senior analyst at OANDA, “if consumer prices come in hotter than expected, gold might see selling pressure target the $1,680 level” and a sharp easing of pricing pressures might only offer moderate support for gold.

 

The opportunity cost of owning non-yielding bullion rises as interest rates rise.

 

This week, despite lower prices, demand for actual gold in some Asian centers remained strong. [GOL/AS]

 

The price of silver increased by 1.2% to $18.79 an ounce, indicating a weekly gain.

 

Palladium increased 2% to $2,182.18 an ounce and was on track to have its best week since July.

 

On track for its highest weekly increase since early June, platinum edged up 0.1% to $879.83 per ounce.

Stocks rise as tech, growth shares lead; the 2-year US yields at 14-year highs

The three major Wall Street indexes all finished the week up at least 1%, marking the first weekly rise in the previous four weeks.

 

Reuters: NEW YORK On Friday, global markets rose, led by technology and growth firms, and interest-rate-sensitive two-year U.S. Treasury rates reached levels not seen in 14 years as investors absorbed the idea that additional interest rate increases were required.

 

A day after the European Central Bank raised interest rates by a record 75 basis points on Thursday, signaling additional increases to combat inflation, the dollar dropped to a level not seen in more than one week, while the euro soared back over parity to a three-week high against the U.S. currency.

 

The three major Wall Street indexes all finished the week up at least 1%, marking the first weekly rise in the previous four weeks.

 

According to Jake Dollarhide, CEO of Longbow Asset Management in Tulsa, Oklahoma, “the market has finally accepted the projected 75-basis-point hike from the (Federal Reserve) this month after three weeks of a temper tantrum.”

 

According to Dollarhide, “people intellectually realize we have to change inflation, and that’s being done… and rates are still extraordinarily low.”

 

The Fed raising interest rates by 75 basis points this month is priced in at 87% likelihood by U.S. rate futures.

 

According to Fed Governor Christopher Waller, the U.S. central bank should raise rates quickly while the economy is still “capable of taking a hit.”

 

The remarks were made a day after Fed Chair Jerome Powell reiterated that the goal of the central bank is to address the rising pricing pressures.

 

Investors anticipate Tuesday’s release of significant August U.S. inflation data.

 

The Nasdaq Composite increased 250.18 points, or 2.11%, to 12,112.31, the S&P 500 increased 61.18 points, or 1.53%, to 4,067.36, and the Dow Jones Industrial Average increased 377.19 points, or 1.19%, to 32,151.71.

 

The global stock market index MSCI increased by 1.73% while the pan-European STOXX 600 index increased by 1.52%.

 

The yield curve for Treasury bonds was further inverted. Some people interpret the inversion as a warning that a recession is likely to occur within the next one to two years. The highest two-year yield since November 2007 was 3.575%. 

 

The most recent benchmark 10-year note yield was 3.321%. They are maintaining below the 11-year high of 3.498% hit on June 14 while having increased from a four-month low of 2.516% on August 2.

 

Germany’s two-year bond yield had reached a two-day peak not seen since 2011.

 

In terms of currencies, the dollar index retreated following recent strong advances, falling as low as 108.35 and ending down 0.5% at 108.96. Also posting its first weekly decrease in four weeks was the dollar index.

 

According to Greg Anderson, global head of FX strategy at BMO Capital Markets in New York, “markets are getting a bit apprehensive about levels, really historic levels, so the market chose not to push the dollar’s strength at this point and lightened up bets.”

 

This week, the dollar index surged to a more than 20-year high while the greenback reached 24-year highs against the yen and sterling.

 

Up to 1.2%, the euro increased to a three-week high of $1.0114. At $1.0045, it was last up 0.5%.

 

Sterling last traded at $1.1588 in other currencies, up 0.77% on the day.

 

After the pound hit a 35-year low against the dollar earlier this week, the death of Queen Elizabeth on Thursday has added to the uncertainty in Britain. [GBP/]

 

Following the passing of the queen, the Bank of England decided to postpone its decision on interest rates for a week, to September 22.

 

Additionally, cryptocurrencies advanced, with bitcoin rising 10.1% to $21,263.

 

A barrel of Brent crude increased by $3.69, or 4.1%, to close at $92.84. West Texas Intermediate (WTI) crude for the United States increased $3.25 or 3.9% to close at $86.79 per barrel.

 

(Additional reporting by Carolyn Cohn in London, Gertrude Chavez-Dreyfuss in New York, William Mallard in Will Dunham, and Louise Heavens in editing.)

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