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Stock Market Performance is the indicator of the stock market as a whole or of a specific stock. It gives signal to the investors about their future moves. The movement in the price of a stock and the indexes gives the idea of the near future trend of the stock, sector or the economy as a whole. As financial domain is the most important one of an economy, so the stock market performance works as an indicator of the overall health of the economy.
Stock Market Performance is affected by a wide array of factors such as economical, political, international, and company-specific issues. When it comes to the overall index performance then the domestic economy's National Income, GNP (Gross National Product) growth, PPP (Purchasing Power Parity), Monetary issues, Political Stability, International Relations, Balance-of-Payment situation, etc. comes into consideration. But when it zeros down to the specific stocks then the company specific information (profitability, sales, profit margin, growth, etc.) play important role in the price determination of the stock.
When the stock prices and the index movements show positive trend (that is, upward movement) then we call that the stock market performance are bullish. We call an investor to be bullish when his perceptions about the market and the economy are positive, i.e., he is expecting further rise in prices, and consequently is in the buying spree.
Some of the factors which boosts up the market are good present or projected economic growth of the economy, positive monetary outlook of the apex bank, decrease in fiscal deficit, good performance of a company in terms of profit, sales, etc.
But when the general perception of the investors is negative then the stock market also declines showing a bearish trend. When a person is not confident enough to buy stocks because of his negative expectations from the economy and sells off stocks then he is known as an investor with Bearish perceptions.
If the performance of an economy is good then the Stock Market Performance is also good and bull markets are inevitable. Performance of an index (or a stock) might exceed that of the actual performance of the economy (or a company) because the expectations of the investors might cross the actual performance of the same. Thus Bull Run encounters correction of indexes or stocks from time-to-time, which is actually a healthy sign.
If the economic performances are not up to the mark then the stock market is most likely to under perform and might see a downward trend. This downward movement of the market is known as Bearish Market. Bullish/bearish market may sustain for weeks or months with temporary rally known as secondary trend (or short term). When bullish/bearish market runs continue from 5 to 20 years with occasional corrections then it is known as Secular Trend (Long Term).
Hence, overall economic and stock specific performance influences performance of the market. Thus, Stock Market Performance acts as the barometer of the economy as a whole.