Supply And Demand Also Affect Stock Market Performance

I was thinking about this rather misleading performance analysis which may have inadvertently resulted to Gloria Macapagal-Arroyo's pardon from whatever crimes she supposedly committed. Now, it's no secret that the Philippine Stock Exchange is in a new level of low -- which means it's time to buy stocks now. But you've got Yellow analysts who'd conveniently blame anyone not in their camp. For instance, can we accredit Gloria's and Noynoy's economic reform program or maybe blame Fidel V. Ramos for the 31% decrease in stock market performance to Joseph Estrada's first 100 days?

So what could the Yellow economists and well economic neanderthals be ignoring? It doesn't take a doctorate in economics to understand this one simple fact -- the law of supply and demand! While supply and demand alone isn't the only reason why the stock market goes up or down in terms of prices -- but let's consider this one. If more people demand to buy stocks then normally stocks will go up because demand is up. But when there aren't much people investing in stocks then demand goes down along with the prices of stocks!

Here's something I got from the Business Mirror which "blames" Noynoy for the stock market's ups and downs which is dated last 2016:

If the economy is doing well, then you make more money operating a siomai kiosk than taking stock- market risk. Since the market is a self-fulfilling prophecy, less investment means less price increase. If the economy is not doing so well, then it makes sense to invest in the stock market and prices go up.

True or false: Stock prices reach a peak when interest rates also reach their peak? Answer: True. As interest rates go higher, so does the market, as stock prices must offer at least a similar return as debt instruments. When rates peak, so does the market. Market tops come at interest-rate tops.

Two months ago, the Philippine Stock Exchange (PSE) failed to break and hold a new historic high above 8,000, basically the same level as the high in 2015. Why did this happen? The newly appointed stock-market experts are putting the responsibility on President Duterte. Actually, the short answer for the blame is former President Benigno S. Aquino III.

In 2015 the PSE reached the 8,000-level historic high. Aquino said this on April 14, 2015: “I expect to ring the bell in celebration of the index breaching the 9,000 and 10,000 levels, hopefully before I step down from office.” He was wrong. The PSE fell 25 percent from then until end-January 2016. Certainly, no one in their right investment mind would have held through that decrease. Psychologically, 8,000 has become a major trauma level.

Of course, Aquino is not to blame. However, here is the long-answer reason the PSE fell 25 percent. First, 2015 was marked with steadily increasing economic growth. Ignore the actual numbers. The key in 2015 was the increasing trend of growth, which was much like 2013. Note also that the stock market fell in 2013 just like in 2015.

Second, interest rates went up at the end of 2014. Interest rates stayed at a three-year high as the PSE dropped that 25 percent. And notice that rates started going down in January 2016 as the PSE started going up. Now the market is reacting to rates having peaked and going lower.

So what's the difference between Noynoy and Duterte in the stock market? As the article suggests -- economic growth can also mean stock prices will decline. It can be safely assumed this way -- more people demanded stocks during Gloria's to Noynoy's term. If the demand went up from Gloria to Noynoy then one must consider this -- what goes up must inevitably come down! It's just like boiling water -- the moment it stops boiling then the temperature must go down! The same can be true for anything in economics such as interest rates, supply and demand.

This should also want me to ask the question to the biased analysts who wear yellow shades -- do you want prices of stocks to be always up? If the prices of stocks are always high then who would buy the stocks in President Duterte's term? Also, for the first 100 days in office for Noynoy to at least get an increase of prices by 26% -- shouldn't that be because the first two years are not his but Gloria's? Just like the first two years of better economic performance (in spite of some blunders) is not President Duterte's but Noynoy's. Hmmm but I guess the Dilawans are just too selfish to share the fruits, aren't they? It's just like why didn't Noynoy show up during the inauguration of the new Mactan Airport because he too was part of it? Also for Noynoy to celebrate -- it should be that many are now selling their stocks bought during his term resulting to more increase in money for people's pockets -- which in turn increases bank savings which is essential for more spending.

Hmmm come to think about it that interest rates went up last 2014 and the PSE dropped by 25%. This shows the inverse proportion that when one goes up then the other must go down. Who would want to borrow money when interest rates are up? I definitely wouldn't want to take a loan if interest rates are up so I could invest in stocks. Instead, I would wait for it to go down before I'd borrow a certain sum for stocks. More people will borrow money when interest rates are low so they can invest in stocks -- which in turn increases demand for stocks causing their prices to soar up! Then when the stock market finally reaches it peak then it's time to raise interest rates up again. In short, it was subject to the law of supply and demand.