Factors Driving the Stock Market in the Long Run

Stock exchange board

The stock market, as all professionals in the world of finance and investment will agree, is based on multiple drivers. Certain factors drive the stock market in the long run and have been affected by the COVID-19 pandemic. These factors always give an indication of how the stock market is performing and will perform in the future. 

In this article, we take a look at all the factors driving growth and success in the stock market. Go through these drivers to better understand how the market operates and works. 

Earnings

By earnings, we mean the earnings made through investment in the stock market and not earnings in general. Companies determine earnings through EPS or earnings per share ratio, and the growth or downfall of a stock market is determined through the EPS of the different companies operating in the market. 

Currently, earnings have suffered because of the global pandemic. The growth of earnings across the major stock markets across the globe will signal news of complete market recovery. As we have discussed above, the problem of uncertainty regarding COVID-19 still persists and investors have suffered because of it. 

Investors should only make investments in the market after analyzing earnings growth and recognizing the potential for a significant return on investment. 

Dividends

Dividends certainly have met a dead end or a cul de sac of sorts. Many companies operating in stock markets across the globe have either cut or suspended their dividend payments until the situation gets better. 

This procedure is now common with companies that pay dividends as they try to find a way out of the conundrum surrounding the situation. The trend of plummeting dividends is a sign that the market is currently struggling, and investments should only be renewed when there are signs of better dividends on offer. 

The Price to Earnings Market Multiple

Stock market experts believe that the market multiple is another way to identify and gauge the success of stock markets. Currently, the market multiple is actually increasing with time, which is sign enough for investors to be optimistic. An increasing market multiple is a sign of the fact that better times are about to come, where earnings will eventually go up. 

Liquidity

Liquidity is concerned with the availability of money to companies paying off dividends and investors earning money. The stock market is dependent on the increasing or decreasing availability of money. In relation to how the stock market initially responded to the COVID-19 pandemic, liquidity is currently improving within the United States. This increase in liquidity can be attributed to the Federal Reserve for their efforts to make money more available at all times. 

It is hard to make predictions related to the stock market, especially in times as uncertain as these. However, from what we do know, investments will pay their due reward if you find the perfect company and invest cleverly. 

The stock market is showing positive signs of improvement, and there is every reason for you to expect the best from it. Lloyds Brokers in Sydney can help investors find the right avenues for investments and improve their holdings through the right portfolio.

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