Why do stock prices go up and down? Why can a stock rise one day and fall the next?
In this beginner-friendly video, you'll learn how stock prices change in the U.S. stock market and what causes shares to rise or fall.
A stock's price is influenced by buyers and sellers, supply and demand, company earnings, future expectations, breaking news, interest rates, inflation, economic conditions, and investor sentiment.
In this video, you'll learn:
• Why stock prices change
• How buyers and sellers affect stock prices
• What supply and demand mean in the stock market
• How company earnings can influence share prices
• Why a stock can fall even after good news
• How future expectations affect stock prices
• How company news can move the market
• How interest rates and inflation may affect stocks
• What investor sentiment means
• How large institutional investors can influence trading
• Why stock price predictions are never guaranteed
• A practical example using a fictional American company
We'll use simple examples and hypothetical stock prices to explain these concepts step by step.
Important Lesson: A company's stock price doesn't depend on just one factor. Prices change as market participants respond to new information, changing expectations, and the prices at which buyers and sellers are willing to trade.
This video is part of our U.S. Stock Market — Zero to Advanced series, designed to help beginners understand the American stock market from the ground up.
📚 Continue Learning:
In the next video, we'll explore Market Capitalization (Market Cap), how it's calculated, and how it differs from a company's stock price.
Subscribe for more beginner-friendly lessons about stocks, investing, and the U.S. stock market.
Disclaimer: This video is for educational and informational purposes only. It is not financial or investment advice. Stock prices can rise or fall, and investing involves risk. Always do your own research before making investment decisions.
#StockMarketForBeginners #StockPrices #USStockMarket
Why Do Stock Prices Change? | U.S. Stock Market Explained
What Makes Stock Prices Rise or Fall? | Beginner's Guide
Why Do Stocks Go Up and Down? Supply and Demand Explained
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📈 Quick Quiz: Why Do Stock Prices Change?
Imagine a fictional company called ABC Technologies.
In this beginner-friendly video, you'll learn how stock prices change in the U.S. stock market and what causes shares to rise or fall.
A stock's price is influenced by buyers and sellers, supply and demand, company earnings, future expectations, breaking news, interest rates, inflation, economic conditions, and investor sentiment.
In this video, you'll learn:
• Why stock prices change
• How buyers and sellers affect stock prices
• What supply and demand mean in the stock market
• How company earnings can influence share prices
• Why a stock can fall even after good news
• How future expectations affect stock prices
• How company news can move the market
• How interest rates and inflation may affect stocks
• What investor sentiment means
• How large institutional investors can influence trading
• Why stock price predictions are never guaranteed
• A practical example using a fictional American company
We'll use simple examples and hypothetical stock prices to explain these concepts step by step.
Important Lesson: A company's stock price doesn't depend on just one factor. Prices change as market participants respond to new information, changing expectations, and the prices at which buyers and sellers are willing to trade.
This video is part of our U.S. Stock Market — Zero to Advanced series, designed to help beginners understand the American stock market from the ground up.
📚 Continue Learning:
In the next video, we'll explore Market Capitalization (Market Cap), how it's calculated, and how it differs from a company's stock price.
Subscribe for more beginner-friendly lessons about stocks, investing, and the U.S. stock market.
Disclaimer: This video is for educational and informational purposes only. It is not financial or investment advice. Stock prices can rise or fall, and investing involves risk. Always do your own research before making investment decisions.
#StockMarketForBeginners #StockPrices #USStockMarket
Why Do Stock Prices Change? | U.S. Stock Market Explained
What Makes Stock Prices Rise or Fall? | Beginner's Guide
Why Do Stocks Go Up and Down? Supply and Demand Explained
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📈 Quick Quiz: Why Do Stock Prices Change?
Imagine a fictional company called ABC Technologies.
Category
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LearningTranscript
00:00Welcome to this explainer. You know, if a share of Apple is trading at $200 today, why on earth might
00:06it be $205 or, heaven forbid, $195 tomorrow?
00:10What is actually happening behind the scenes?
00:12Well, by the end of this, you're going to stop seeing the stock market as some random, chaotic casino and
00:18start seeing the hidden, highly logical gears turning just beneath the surface.
00:22We're going to solve a massive paradox today. Honestly, this is probably one of the most frustrating things for anyone
00:29watching the market.
00:30You'll see a huge headline that a company just had its most profitable year in history.
00:34But the very second the market opens, its stock price completely plummets.
00:39Why on earth does a stock tank the exact moment a company announces record profits?
00:44We're going to unpack the exact mechanisms that drive stock prices totally against our common sense expectations and show you
00:51why what looks like, quote unquote, good news can actually trigger a massive sell-off.
00:56Here's our roadmap for today.
00:58First, the secret of share price.
01:01Second, the game of supply and demand.
01:03Third, earnings, news, and expectations.
01:05Then we'll cover interest rates and inflation, followed by investors' sentiments.
01:10And finally, number six, is prediction possible?
01:13Let's jump right in.
01:15All right, part one, the secret of share price, unlocking the basics.
01:19Let's just establish the absolute baseline of what a share price actually represents.
01:24Listen, a stock price isn't some magical number spit out by a supercomputer in a basement somewhere.
01:29It's actually just the result of three sequential steps happening over and over again.
01:35It all starts when buyers and sellers meet in the middle.
01:38When someone is willing to buy at a specific price and another person is willing to sell at that exact
01:43same price, a trade is executed.
01:45Bam.
01:46It's this continuous, nonstop stream of orders and completed trades that causes the market price to jitter up and down
01:52second by second.
01:53But the real underlying question is, what makes those buyers and sellers change the prices they're actually willing to accept?
02:00The game of supply and demand, the driving force.
02:03Let's look at how that basic trade mechanism builds into the absolute core engine of the entire market.
02:10To really get a grip on the market, you've got to separate these two concepts in your mind.
02:14Supply is simply how many shares are currently sitting there, waiting to be sold at a specific price point.
02:20Demand is the desire from investors who have actually put their money where their mouth is and placed orders to
02:25buy at a specific price.
02:26The interaction between these two forces is literally the heartbeat of all stock fluctuations.
02:32Let's make this super concrete.
02:34We'll use a fictional tech company for our case study today.
02:36Let's call them ABC Technologies.
02:39Right now, their stock is sitting at a nice, solid $50 a share.
02:42We're going to use this $50 to anchor our example as we see how different pressures shift its value in
02:47real time.
02:49So imagine ABC Technologies suddenly announces they've developed a groundbreaking new piece of tech.
02:55Investors immediately think this is going to massively boost future business.
02:59What happens next?
03:00Demand spikes.
03:01It's just like a wild auction.
03:03Buyers are suddenly totally willing to outbid each other to get in on the action.
03:07And if the current owners, the sellers, only agree to let go of their shares at higher prices, that buying
03:13pressure forces the executed trades outward.
03:15Maybe pushing that $50 stock all the way to $55.
03:18But on the flip side, if investors get spooked about the company's future and just want out, they'll aggressively slash
03:24their asking price just to secure a sale.
03:26That selling pressure forces the executed trades down to, say, $48.
03:30It is a relentless, continuous tug-of-war.
03:33Earnings, news, and expectations.
03:35The internal reality.
03:36Now, this is where it gets really interesting.
03:39Seeing how a company's internal, real-world performance manipulates that tug-of-war of supply and demand.
03:45Let's look closely at ABC Tech's profits.
03:48Last year, they raked in $100 million.
03:51This year, they hit $150 million.
03:54On paper, that is objectively fantastic news, right?
03:57The company is growing.
03:58But wait a second.
03:59Look at the market expectation.
04:01The market actually expected them to make $200 million.
04:06And boom.
04:07This perfectly illustrates our opening mystery.
04:09The market was already pricing the stock based on an expectation of 40% growth.
04:14So when the actual, real-world result came in at only 20% growth, the reality totally failed to meet
04:20the hype.
04:21The investors who bought in, anticipating a $200 million blockbuster year, are now incredibly disappointed.
04:27Because of that, they start selling.
04:29And the stock price drops.
04:31Despite the fact that the company technically just announced record profits.
04:35It proves a crucial rule.
04:36The market is entirely forward-looking.
04:39It doesn't just measure how you did.
04:41It measures how you did compared to what everyone thought you were going to do.
04:45And you know, this expectation game applies to literally all company news.
04:49Whether it's a rocket ship new product launch, a major merger, or a sudden nasty legal dispute.
04:55If a major CEO change is announced out of absolutely nowhere, investors might predict chaos and immediately sell off.
05:01But here's the really critical nuance.
05:03If news of a big merger was already expected, and rumors had been flying around for months, the actual, official
05:09announcement might barely move the stock price at all.
05:12Why?
05:13Because that expectation was already, quote-unquote, priced in.
05:16Okay.
05:17Part 4.
05:18Interest rates and inflation.
05:19The external reality.
05:21Because, let's face it.
05:22Even if ABC Technologies is doing everything perfectly internally, they don't exist in a vacuum.
05:28They are completely at the mercy of the massive macroeconomic factors shaping the broader world.
05:33Let's talk about interest rates for a second.
05:35In the U.S., when the Federal Reserve hikes interest rates, borrowing money gets way more expensive for businesses.
05:41That means funding new, exciting projects or expansions costs a lot more, which can seriously slow down their growth.
05:48But there is another, deeper layer here.
05:51When interest rates are high, completely alternative investments that bear interest, like government bonds, suddenly become incredibly attractive.
05:58They offer solid, guaranteed returns with way less risk.
06:02This literally pulls investor money right out of the stock market, dropping the overall demand for shares.
06:07Conversely, falling rates make borrowing cheap, and they make stocks look much more attractive compared to those low-yielding bonds.
06:14Similarly, inflation acts like this brutal, unavoidable domino effect on a business.
06:19If inflation is running hot across the economy, a company is suddenly facing higher costs for raw materials, transportation, and
06:26employee wages.
06:27The whole shebang.
06:28If they can easily pass those higher costs on to their customers by raising prices, hey, they might be fine.
06:34But if they operate in a highly competitive space and can't raise prices without totally losing their customer base,
06:39those increased costs are going to squeeze their profit margins directly.
06:42And investors know this.
06:44The mere threat of inflation can cause massive sell-offs way before the profits actually drop.
06:50Investor sentiments.
06:51The human element.
06:53Let's pivot from hard-cold economic data to the absolute wildest wildcard in the market.
06:59Human psychology.
07:01At the end of the day, the market is made up of people.
07:04And let's be honest, people are highly emotional.
07:07Pure emotion, whether it's widespread euphoric optimism or deep panic-inducing fear,
07:12can drive demand entirely independently of a company's actual financial health.
07:17We call this investor sentiment.
07:19Sometimes investors are just incredibly optimistic about the future and buy up stocks in a frenzy,
07:24driving prices to irrational highs.
07:27Other times, fear takes over, and they dump assets just to survive, pushing prices down,
07:32regardless of how strong a company's fundamentals actually are.
07:35Herd mentality is a very, very powerful trap.
07:38And we aren't just talking about everyday folks panicking on their smartphone apps.
07:42The market is heavily populated by massive institutional investors.
07:46Think massive mutual funds, pension funds, huge insurance companies.
07:50When these titans decide to buy or sell, they aren't trading 10 shares.
07:54They are dumping millions of shares at once.
07:57These orders are so unbelievably large,
07:59they can single-handedly consume all the available liquidity in a market.
08:02If an institutional investor dumps massive sell orders,
08:06and there just aren't enough buyers waiting at the current price,
08:09those trades will be forced to execute at lower and lower and lower prices,
08:13physically driving the stock price down all by themselves.
08:17Finally, part six.
08:18Is prediction possible?
08:20The final reality?
08:21Bringing all these internal stats, external pressures, and wild human emotions together,
08:26we arrive at the ultimate question for any investor.
08:30So, can you actually predict a share price?
08:32I mean, just think about how many wildly diverse variables
08:35are acting on a single stock at the exact same second.
08:38The immediate price is just a reflection of supply and demand, sure.
08:41But that demand is being ripped in a dozen different directions.
08:45It's pulled by earnings versus expectations.
08:47It's dragged down by the cost of borrowing money through interest rates.
08:50And it is heavily manipulated by the overall greed or fear of the market itself.
08:55Because there are just so many moving parts perfectly predicting the market,
08:59it's fundamentally impossible.
09:01Sure, analysts can crunch numbers, study financial statements,
09:04and track economic data all day long to map out probabilities.
09:07But they absolutely cannot foresee a sudden global crisis,
09:11a shock change in interest rates,
09:13a groundbreaking new competitor,
09:15or some revolutionary piece of technology
09:17that makes an old business model completely obsolete overnight.
09:20There are simply no guarantees.
09:22So, we've solved the mystery of why prices constantly fluctuate.
09:25It's this delicate, honestly kind of chaotic dance of expectations,
09:30macroeconomics, and raw human emotion.
09:33But all of this leaves us with one final, incredibly provocative question.
09:38If a stock price is driven by so much emotion and future guesswork,
09:42does it ever truly reflect what a company is actually worth in the real world?
09:46Well, that is exactly what we are going to explore in our next explainer
09:50when we tackle market capitalization.
09:53You absolutely won't want to miss it.