The Stock Market and Business Cycle. What is a Stock Market? When you start up a business you need money. Not everyone has enough money so often they.

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Presentation transcript:

The Stock Market and Business Cycle

What is a Stock Market? When you start up a business you need money. Not everyone has enough money so often they will get a bank loan or they will find partners and offer them a share in your profits in exchange for investing money in your business. Companies that need a lot of money (Mac, Microsoft, GM) can sell shares in their business on the stock market.

Why do people buy stocks? 1.They hope that the success of the business will cause the value of each share to rise. Then they will sell the stocks and make a profit. 2.If the company is doing well, shareholders will receive a portion of the company’s profits. This is called a dividend.

How the Stock Market Works The Buyer – wants to purchase stocks, they contact the broker The Broker – recommends stocks and contacts the floor trader The Floor Trader – closes the deal at the current market price The Broker contacts the floor trader and tells him to sell the stocks The Seller decides to sell their stocks and contacts the broker

Black Tuesday Tuesday, October 29 th is called Black Tuesday because it was the day share prices nose-dived. Experienced investors had recognized that prices had gone high as they could go, and that this was a good time to sell their stocks. Many put large blocks of stock on the market. All these sell orders caused share prices to nosedive.

Black Tuesday As a result many brokerage firms went bankrupt. Many people lost everything they had and they owed money to the investment brokerages that they had borrowed from. Stock markets collapsed in Montreal, Toronto, New York and around the world.

Black Tuesday continued Investors weren’t the only people who were hurt by the crash. Companies also suffered. Because people were no longer buying shares companies had less money available to them. As a result companies cut back on production or closed. Many people faced wage cuts. Soon 1 in 4 Canadian workers were unemployed.

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