Governments overspending and the markets

mn1

How does public overspending usually affects the stock markets ?
Sorry if this is oversimplifying a big subject 
TIA

MaxiRobriguez

mn1 said:

How does public overspending usually affects the stock markets ?
Sorry if this is oversimplifying a big subject 
TIA

It's a very broad subject to broach but typically in the short term at least markets react well to 'overspending' as it's deemed supportive - the U.S fed is the obvious example as any time it pumps money in the U.S indices notch up a level, even if the reason for the pumped in money is because of increased negative sentiment.

Much harder to assess longer term impact.

bowlhead99

mn1 said:

How does public overspending usually affects the stock markets ?
Sorry if this is oversimplifying a big subject 
TIA

It is oversimplifying it. To give a simple answer in three sentences:

- 'public overspending' (whatever exactly you mean by that) can have a variety of somewhat complex effects on the amount of income and profits made by individual businesses on or off the stock market and can feed into the levels of inflation likely to be felt by an economy, the level of taxation and interest rates likely to be set as future policy (which can affect demand for pounds versus other global currencies) and ultimately the perceptions held by stock market participants of how the projected levels of consumer, business and government demand for goods and services will affect pricing of those goods and services, their direct and indirect costs (including wages and salaries driven by the supply of labour and inflation), the changes to costs and revenues from overseas suppliers and customers driven by exchange rate effects, the relative ease of borrowing by companies for expansion or to to support cash outflows from losses or product development, and thus the profit (and the amount of profit left over after taxes) for each of the companies trading on the market.

- this will feed into how desirable the companies' assets, future expected assets and current and future level of profits are considered to be when weighed against the projected returns from alternatives such as bonds, commodities or cash (whose returns will likewise be affected by current and future government and central bank policy towards taxation and public spending /overspending).

- the change in relative attractiveness of the various individual companies listed on the stock market will change the overall value ascribed to those individual companies by market participants, and thereby change the overall level of the market as measured by an index.

Unfortunately, you probably feel that answer hasn't answered your question adequately, or simply, which is what you were looking for.

A shorter answer is, "it's complicated".