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The Impact of Fiscal Policy on Stock Price

Finance is the distribution activity of a part of social products by the state in order to realize its functions. It reflects the economic relationship between the state and its related aspects of the whole country. The source of national financial funds mainly comes from the net income of enterprises. Its size depends on the development of the material production sector, the optimization of economic structure, the level of economic benefits, and the correctness of fiscal policy. Financial expenditure is mainly used for economic construction, public utilities, education, national defense and social welfare. The reasonable budget revenue and expenditure and measures of the state will promote the stock price to rise, and the key use direction of the national budget will also affect the stock price. The financial scale and fiscal policy have a direct impact on the stock market. If the fiscal scale is expanded, as long as the State adopts a positive fiscal policy, the stock price will rise; on the contrary, if the national fiscal scale shrinks, or if it shows the omen of fiscal tightening, investors will reduce their investment by predicting the future economic downturn, and the stock price will fall. Although the degree of stock price reaction will vary according to the stock price level at that time, investors can take the increase or decrease of financial scale as one of the bases to identify thechange of stock price.

The key direction of financial investment also has a great influence on the performance of enterprises. If the government adopts industrial preferential policies for transportation, energy and basic industries, the stock prices of these industries will be affected. Fiscal expenditure is constantly increasing or decreasing, which directly affects enterprises related to finance, such as industries related to electric communication and real estate. Therefore, every investor should understand the core part of fiscal implementation. The time point of stock price change is usually before the government's budget principles and key policies have been published, or in the initial stage after the budget announcement. Therefore, investors should pay close attention to the change of national fiscal policy. If the investors can pay attention to the initial stage of financial policy changes, they will make timely decisions on buying or selling.

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