The stock market is undoubtedly one of the most volatile trading options in the Netherlands and other parts of the world. In the first quarter of 2021, the Dutch stock market index (AEX) closed at just under 700 points. The Dutch market comprises companies listed on the Amsterdam stock exchange and Dutch corporations listed on other markets.
Stock market volatility leads to risky equity investments. Cautious investors are more likely to stay clear of the Dutch stock market because of the fluctuations. However, risk-takers invest aggressively in equities to build wealth over the long term. They consider the volatile nature an attractive potential worth taking advantage of to make gains.
It is impossible to forecast the future stock market performance in the Netherlands. However, with the help of top brokerage firms such as Saxo, you can navigate your way through the stock market with ease. What elements drive the market to fluctuate?
Factors That Can Affect Stock Prices
An increasing number of multinational corporations
In addition to rising stock prices, the overall market value of Dutch companies fluctuates due to the expansion of overseas corporations establishing a presence in the country. The Netherlands was one of the first countries to serve as a home base for multinational corporations. The country has a long history of being a very open economy in general.
A significant group of multinational corporations has their corporate contract, but a sector memorandum of understanding protects other corporations. The share of corporate agreements involving multinational corporations is higher than the median. The Dutch structure of industrial relations appears to be unproblematic for the vast majority of multinational corporations.
Performance of the industry
In many cases, the stock prices of companies that operate in the same industry will coordinate with one another. The reason is that market dynamics often affect companies within the same industry in the same manner. However, if two firms are vying for the same marketplace, a few bad headlines for one of them can positively impact the stock share price of the other.
In addition, changes in investor attitude or enthusiasm can cause the market to fluctuate, leading to stock prices moving up or down. The general direction that the stock market is heading in can also affect the value of a stock. During a bullish market situation, investor confidence increases, and the opposite happens during bearish market conditions.
In October of 2021, the Netherlands saw the highest rise in inflation since 2002. Higher inflation leads to an upsurge in consumer prices, which reduces profits due to slow sales. With higher prices, you can expect the interest rates to rise too. While commodities perform better with inflation, stock prices, on the other hand, go down.
One of the worst deflations ever recorded was The Great Depression that lasted from 1929 to 1939. The Dutch stock exchange was one of the markets seriously affected by the Great Depression. It rose from the ashes to become one of the best markets in the world, but the fear of going back to that period lives on.
During deflation, prices fall, resulting in lower profitability for businesses and a reduction in economic activity. Stock prices may fall, too, causing investors to sell their holdings and shift their money to fixed-income investments such as bonds.
Economic and political upheavals
The Netherlands enjoys a calm political atmosphere and a stable economy. However, Changes in the global economy can impact both the Nation’s economic growth and stock markets prices.
Reduced sales, falling profits, and relatively low stock prices can result from increased energy prices. A terrorist attack can also result in a decrease in economic output and stock market prices.
The Netherlands stock market is one of the best in the world. It is also one of the oldest and a favourite with many foreign and domestic investors. However, the stock market is also very volatile. The factors mentioned above are some of the causes of the stock market fluctuations. If you are a new investor, talk to experts to learn everything you need about the Dutch Stock Exchange.