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The main content of fundamental analysis

The so-called fundamentals refer to the status of some basic factors that affect the trend of the stock market. Through the analysis of the fundamentals, the basic factors that determine the changes in stock prices can be grasped, which is the basis of stock investment analysis.


Fundamental factors mainly include:

1. Macroeconomic conditions

From along-term and fundamental point of view, the trend and changes of the stock market are determined by the level of economic development and economic prosperity of a country. Stock market price fluctuations also reflect changes in macroeconomic conditions to a large extent. It is not difficult to find from the historical trend of foreign stock markets that the trend of stock market changes generally coincides with the economic cycle. During the economic boom, companies are operating well, making more profits, and their stock prices are rising. When the economy is in a recession, the decline in corporate income and the decline in profits will also cause its stock prices to continue to fall. However, the trend of the stock market and the economic cycle are not the same in terms of time. Generally, the changes in the stock market must be advanced to a certain extent, so the stock market price is called a barometer of the macro economy.

2. Interest rate level

Among the many factors that affect the trend of the stock market, interest rates are a relatively sensitive factor. Rising interest rates may attract part of the funds to the bank savings system, thereby feeding the amount of funds in the stock market and having a certain impact on stock prices. At the same time, due to rising interest rates, business operating costs will increase, and profits will decrease, which will correspondingly cause stock prices to fall. Conversely, if interest rates are lowered, people may invest more funds in the stock market due to their inherent need to maintain and increase their value, thereby stimulating stock prices. At the same time, due to lower interest rates, lower operating costs of enterprises and increased profits have also contributed to rising stock prices.

3. Inflation

This factor has pros and cons to the stock market. It has the effect of stimulating the market and depressing the market. However, in general, it does more harm than good, and it will increase the bubble component of the stock market. In the initial stage of inflation, the increase in currency will stimulate production and consumption, and the growth rate will increase the profitability of enterprises, which will promote the rise of stock prices. However, when inflation reaches a certain level, it will push interest rates up, which will cause stock prices to fall.

4. Enterprise quality

For specific individual stocks, the main factor that affects the price level is the inherent quality of the company itself, including a series of factors such as financial status, operating conditions, management level, technical capabilities, marketsize, industry characteristics, and development potential.

5. Political factors

Refers to political reasons that directly or indirectly affect the stock market, such as the international political situation, political events, relations between countries, changes in important political leaders, etc., which will have a huge and sudden impact on stock prices. This is also an important aspect that should be considered in the fundamentals.