SESI 10 MAKROEKONOMI DAN MIKROEKONOMI

Summary

This session explores the key macroeconomic factors that influence stock prices, highlighting how external forces beyond a company's control can impact investment outcomes. Topics include interest rates, inflation, taxation, government policies, foreign exchange rates, international economic conditions, and monetary circulation. The session also covers economic cycles, different economic theories, and practical examples of how these factors directly or indirectly affect corporate profits and stock valuations. By understanding these dynamics, investors can make informed decisions on which stocks to buy or hold, particularly considering sector performance during various phases of economic recovery, prosperity, recession, and depression.

Takeaways

• 📈 Stock prices are influenced by both macroeconomic factors (external, harder to control) and microeconomic factors (internal, easier to manage through company financial ratios).
• 💰 Interest rates affect stock prices: higher loan rates increase company costs and reduce profits, lowering stock prices, while higher deposit rates can lead investors to sell stocks in favor of deposits.
• 📊 Inflation generally negatively impacts stock prices: high inflation reduces consumer purchasing power, while very low inflation indicates slow economic growth, both leading to lower profits and stock values.
• 🧾 Tax policies influence stock prices: increases in corporate tax, personal income tax, or sales tax can lower company profits and reduce stock prices, while decreases have the opposite effect.
• 🏛️ Government policies on exports and imports can affect different industries differently, potentially reducing profits for some companies while benefiting others depending on market conditions.
• 💱 Foreign exchange rates impact companies with international debt or receivables: currency appreciation or depreciation can increase costs or revenue, affecting stock prices accordingly.
• 🌍 International economic conditions and political events, such as wars or legal changes, influence stock prices through both macroeconomic and non-economic factors.
• 📉 Economic cycles (recovery, prosperity, recession, depression) guide investment strategy: durable and non-durable goods stocks perform well in recovery/prosperity, while non-durable goods are safer during recessions or depressions.
• 🏦 Monetary tools, such as reserve requirements, discount rates, and open market operations, regulate money circulation and directly or indirectly affect stock market performance.
• 📚 Economic theories shape government intervention: classical (minimal intervention), Keynesian (demand management), supply-side (offer-side policies), and monetary theory (control of money supply) all influence market behavior and investment decisions.

Q & A

What are the two main categories that affect stock prices?

Stock prices are influenced by two main categories: macroeconomic factors and microeconomic factors. Macroeconomic factors are external to the company and difficult to control, while microeconomic factors are internal to the company and can be managed more directly.

What is the effect of an increase in interest rates on stock prices?

An increase in interest rates, specifically loan interest rates, raises borrowing costs for companies, which reduces their profits. This in turn leads to a decrease in stock prices. On the other hand, when deposit interest rates rise, investors may shift their investments from stocks to deposits, also leading to a drop in stock prices.

How does inflation affect stock prices?

High inflation generally causes the prices of goods to rise, reducing consumer purchasing power and ultimately lowering corporate profits. This leads to a decrease in stock prices. Even low inflation can have a negative effect, as it may indicate sluggish economic growth, which also reduces profits and stock prices.

What impact do taxes have on stock prices?

An increase in corporate income tax or personal income tax reduces disposable income and consumer spending, which negatively affects corporate profits and leads to a decrease in stock prices. Similarly, an increase in sales tax reduces consumer demand, which can also lower stock prices. A reduction in taxes can have the opposite effect, stimulating demand and increasing stock prices.

How do government policies affect stock prices?

Government policies such as export and import restrictions can impact the profits of companies. For example, a ban on exports can reduce a company’s market reach and profits, leading to a drop in stock prices. Conversely, import restrictions can benefit local businesses by reducing competition, potentially increasing their profits and stock prices.

What role does foreign exchange rates play in determining stock prices?

Foreign exchange rates influence companies with international exposure. For instance, if the value of the currency increases, companies with foreign debt may face higher costs when paying back their debts. Conversely, if a company exports goods and the value of the local currency decreases, they can gain higher revenue from international markets.

What is the impact of the economic cycle on stock prices?

The economic cycle includes recovery, prosperity, recession, and depression phases. During recovery and prosperity, stock prices are generally favorable, and all types of products (durable and non-durable) can be good investments. In recession or depression phases, non-durable goods tend to perform better because they are related to essential consumer needs.

What is the difference between durable and non-durable goods, and how does it affect stock recommendations?

Durable goods are long-lasting items like cars, real estate, and machinery, while non-durable goods are consumables like food and pharmaceuticals. During recovery and prosperity, both durable and non-durable goods are recommended for investment. However, during recession or depression, non-durable goods are preferred due to their steady demand, especially in essential sectors.

What is the significance of the theory of supply-side economics in relation to stock prices?

Supply-side economics focuses on policies that encourage production and investment, with the government influencing the supply side of the economy by setting policies that impact the availability and cost of goods and services. This can indirectly affect stock prices by improving business conditions, reducing production costs, or boosting overall economic output.

How does the money supply affect stock prices?

The money supply, controlled by central banks through tools like reserve requirements and interest rates, can influence stock prices. For example, if the reserve requirement is lowered, more money is available for circulation, which can stimulate economic activity and increase stock prices. Conversely, increasing the reserve requirement reduces the money supply, which could dampen economic activity and lower stock prices.