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There are multiple factors affecting a stock index, chiefly in three macro aspects.
First, changes in market interest rates will have a significant impact on the stock market. Generally, pricing for a stock index rises as interest rates fall, and falls as interest rates rise. Therefore, interest rate levels and the relationship between interest rates and the stock market have become important indicators for investors to go long or short stock indices. Whenever the government announces a rate cut or a reserve requirement ratio (RRR) cut, the borrowing costs in the market will fall, and the stock index often rises in the short term. However, when a rate hike is announced, the stock index reacts to the contrary.
Secondly, inflation usually has a significant impact on the stock index. Modest inflation can stimulate the stock market, while severe inflation will weigh on it. Inflation occurs mainly because the central bank increases the money supply too quickly. Generally, the money supply is directly proportional to stock prices, i.e., a larger money supply will cause stock index pricing to rise. When the central bank tightens to suppress inflation by raising interest rates, the stock index will go down.
Thirdly, government fiscal policies will have an impact on the stock market. The government's substantial tax cuts, increased public spending, etc., may stimulate expectations for corporate earnings, causing the stock index to rise in the short term.
Before choosing a stock index for trading, you should first understand the similarities and differences between different markets, basic economic conditions related to stock indices, national policy changes, monetary policy directions and other fundamental factors. You also need to understand technical changes in the stock index, bull and bear cycles, etc. If you are familiar with some stocks, or a country's economic conditions, you may choose to trade the local stock index. Or you can assess which market is more suitable for yourself based on the average daily trading volume of the stock market related to the stock index.