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Does Stock Market Effect Company Profits?

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May 11, 2010 – Comments (1)

How much effect do you think the run up in the market benefited the bottom line of the publicly traded companies?

You notice a lot of profit even with lower sales, a lot is from down sizing and cutting jobs, eliminating expansion, reduced advertising and other expenses used for growth; but what about the market going from 6500 to 10,700 in 9 months?

How does that affect their profit?

Look at Mercury Insurance, their sales are down but they made a lot in their investments. They break this out in their report, but I’m wonder if others blend it in to their profits.

If the investments are contributing to the profits then what will happen now that the dow has stopped its climb?

How long before the reports come out that reflect a flat or negative return on investments from this last 6 months?

1 Comments – Post Your Own

#1) On May 12, 2010 at 4:58 AM, Peshorper (65.12) wrote:

It depends on the company and industry.  Insurance companies will see a direct benefit to their bottom line due to the fact that part of the business is taking insurance premiums upfront and investing it for returns before having to pay our for losses.  This is usually balanced by worse results on the insurance side of the business as insurers will sacrifice their underwriting profit for investment profits but in a supercharged market like the past year, not so much.

Other industries not associated with financial services should be generally a lot less effected as they would generally concentrate on their core business but would still indirectly benefit from asset price (be it real estate, stocks, etc.) appreciation as increased returns for investors contributes to their financial well being and eventually drives consumption. 

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