The Impact of Fiscal Policy on Stock Price

Finance is the distribution activity of apart of social products by the state in order to realize its functions. Itreflects the economic relationship between the state and its related aspects ofthe whole country. The source of national financial funds mainly comes from thenet income of enterprises. Its size depends on the development of the materialproduction sector, the optimization of economic structure, the level ofeconomic benefits, and the correctness of fiscal policy. Financial expenditureis mainly used for economic construction, public utilities, education, nationaldefense and social welfare. The reasonable budget revenue and expenditure andmeasures of the state will promote the stock price to rise, and the key usedirection of the national budget will also affect the stock price. Thefinancial scale and fiscal policy have a direct impact on the stock market. Ifthe fiscal scale is expanded, as long as the State adopts a positive fiscalpolicy, the stock price will rise; on the contrary, if the national fiscalscale shrinks, or if it shows the omen of fiscal tightening, investors willreduce their investment by predicting the future economic downturn, and thestock price will fall. Although the degree of stock price reaction will varyaccording to the stock price level at that time, investors can take theincrease or decrease of financial scale as one of the bases to identify thechange of stock price.

The key direction of financial investmentalso has a great influence on the performance of enterprises. If the governmentadopts industrial preferential policies for transportation, energy and basicindustries, the stock prices of these industries will be affected. Fiscalexpenditure is constantly increasing or decreasing, which directly affectsenterprises related to finance, such as industries related to electriccommunication and real estate. Therefore, every investor should understand the corepart of fiscal implementation. The time point of stock price change is usuallybefore the government's budget principles and key policies have been published,or in the initial stage after the budget announcement. Therefore, investorsshould pay close attention to the change of national fiscal policy. If theinvestors can pay attention to the initial stage of financial policy changes,they will make timely decisions on buying or selling.