5 Factors that influence share prices

Introduction

‘We simply attempt to be fearful when others are greedy and greedy when others are fearful.’

Warren Buffett

The list of factors that influences share prices is more or less endless, and a great many of them may be unknown to the retail investor who struggles to make sense of it all.  An understanding of these factors should help the investor to operate successfully in the world’s complex markets.

In an attempt to bring some order to a diverse range of factors, a classification system is used with the following main headings:

It would be impossible to list all factors that influence share prices, but even an incomplete list should be helpful.

After the financial crisis, the US stock market began, in 2009, a great bull run; however, by 2015 world economic growth had become sluggish, especially in the emerging markets, and there was a dearth of investment opportunities for many US companies.  This resulted in an unprecedented run of share buybacks – companies buying their own shares – as discussed below.

Macroeconomic factors

Gross domestic product

The 28 EU member states now make up 19% of global GDP.

Gross domestic product (GDP) is the market value of goods and services produced within a country each year, so in effect it is the aggregate of all companies’ revenues […]