The stock market is a vast network of economic transactions that take place through marketplaces, known as exchanges. Stocks are bought and sold through these marketplaces, and they may be traded in either up or down trending conditions. Stock prices are determined by supply and demand. If there are more people interested in buying a share of a company than selling it, then the price of that stock will go up. If there are more people willing to sell a stock than buy it, then the price of that stock will fall.
US stocks rallied to new highs this week, helped by strong earnings and optimism that a trade deal could be near in the US-China war. The S&P 500 and Nasdaq climbed to record highs, while the small-cap Russell 2000 index came within striking distance of its own all-time high*.
Earnings reports are expected to provide some perspective on corporate health this week as investors look ahead to back-to-school and holiday shopping season. Bank stocks are a key focus, having enjoyed strong gains in recent weeks as major banks passed the Fed’s annual stress tests and used that strength to announce share buybacks and dividend increases.
But as many investors know, the global economy is connected and events around the world can affect stocks in all markets. Rising unemployment, industrial production slowing, and elevated levels of risk can all push stock valuations down and cause investors to reassess their growth forecasts and the outlook for their own portfolios.
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