How Does Political Factor Affect Stock Prices?

Political factors generally refer to international political activities that have certain influence on stock prices, major economic policies, government decrees and political measures.

(1) changes in the international situation.

If the improvement of diplomatic relations will raise the share price of the multinational companies concerned.

Investors should seize the opportunity to buy shares of relevant multinational companies when diplomatic relations improve.

The influence of war.

The war has caused political and economic instability, turbulence and stock prices in various countries. This is the widespread influence of war.

But the war has different effects on the stock prices of different industries. For example, the war makes the Quartermaster industry flourish, so the stock price of any company related to the Quartermaster industry must rise.

Therefore, investors should timely purchase military supplies and related industrial stocks and sell stocks that are likely to be damaged in the war.

Major domestic political events, such as political turmoil, will also have an impact on stocks.

First, it has an impact on the psychology of the stock investors, thereby indirectly affecting the stock price.

(4) major economic policies of the state, such as industrial policies, tax policies and monetary policies, have a significant impact on stock prices.

The stock prices of the state's key supporting and developing industries will be pushed up, and the stock prices will be adversely affected by the state's compulsory development industries. For example, the state will impose a price limit on the products and services of public utilities, including pportation, gas, hydropower and so on, which will directly affect the profitability of public utilities and lead to the fall in the share prices of public utilities. The change of monetary policy will cause changes in market interest rates, resulting in changes in stock prices. In terms of tax policies, the stock prices of companies that can enjoy national tax reduction and tax exemption preferences will rise.

These policy factors have a certain impact on the stock market itself, that is, through corporate profits and market interest rates, and then lead to changes in stock prices.