Wall Street plays an important role in the global economy. Anything happens in Wall Street will give an impact on the world economy. But Wall Street is filled with many companies that affect it too. So, let’s find out how the big companies affect the Wall Street.
What is Wall Street Exactly?
Geographically, Wall Street is the name of a few blocks of the street in Downtown Manhattan. The street runs from Broadway in the northwest to South Street in the southeast.
But in the financial industry, Wall Street is more directed to the financial services center. It started in 1792 when the traders formalized and organized an association. The traders were entering into and signing an agreement called the Buttonwood Agreement. This was the beginning of the New York Stock Exchange (NYSE).
Nowadays, the term Wall Street is not only referred to as the companies that operate in that location. But it is also meaning any companies engaged in financial services in the whole world.
How Influential is Wall Street?
In the US especially, Wall Street is the biggest stock market. It automatically makes Wall Street has a big influence too. At least there are 3 ways Wall Street affect the US economy, those are:
1. Business Investment
In business investment, companies can sell their stock to get capital. As a result, they can use it to get assets.
2. Wealth Effect
When people feel like their assets are rising, they will more secure and confident. The effect is that they will spend more assets when the value is raising
3. Consumer Confidence
Conducive economic conditions will increase the consumer confidence to invest. Increasing consumer confidence will motivate them to spend more.
How the Big Companies Affect the Wall Street
Many big companies are joining to Wall Street to look for capital. Usually, they are covered by research analysts. The analysts will research about how to develop the companies’ capital.
Their goals are to make sure that the companies can estimate the value of their stock. From the value, the companies as issuers can affect how Wall Street runs.
One of the most obvious things that can influence Wall Street is a trade war. The example is the US-China trade war.
The recent trade war began with President Donald Trump’s plan to impose import duties on Chinese products. He reasoned it must be done to protect national security and intellectual property of US businesses.
When the plan was implemented, China give an act of revenge. They impose similar rates for US products.
As a result, investors are hesitant to invest. They wait for a good time before making decisions and actions. And Wall Street, as the center of the largest stock exchange in the US, of course, is the party most affected.
The trade war continues. Recently, President Trump has threatened to delist Chinese stock. Investors, of course, get anxious to hear the next news. So are Wall Street.
That is how the big companies affect the Wall Street. No matter how big Wall Street is, it still depends on the companies as issuers. However, investors are still the main determinant.