The increase & decrease in stock prices can influence various factors in the economy that have a positive or negative impact on the economy. Alternatively, different economic conditions that are out of our control can also affect the market.
Impact on a Consumer
Stock markets are volatile. The price of a share rises and falls making the markets volatile. As a consumer, it helps them earn money and get good returns for their investment. But sometimes you also lose your money which may lead you to a state of panic.
If the market is bullish, performs well & is generally on the rise. This rise indicates confidence among investors & individuals.
Impact on a Wealth
In a bull market, due to confidence people increase their investments. This has a positive influence on the economy. Sometimes people also increase their investments in market-linked products that help get inflation-beating returns in the long term.
However, a bear market negatively impacts economic growth. This retards growth.
Impact on a Business Environment
Stock market performance influences the business environment. When the market performs well, businesses are likely to raise capital that can fuel their growth.
On the other hand, when markets are down, businesses are not willing to spend, which negatively impacts goods and services and gross domestic product.