The volatility on the stock markets produces some alarm among investors who are speculating about the causes of the falls. Many clients have called us and expressed typical concerns regarding these events. Hence, in the Markets Department at BBVA in Switzerland we feel it would be interesting to explain what factors affect stock market prices.

We are in a scenario in which both the economy and business profits are improving, but are these the only variables that affect stock market trends?

The short answer is no; for example, the recent stock market falls have nothing to do with the trend in business profits (which continue making clear progress) but rather they are due to normal variations in the demand for this asset. The following computer graphics illustrate the factors affecting equity prices: