Companies raise money by issuing shares. Initial stock offering (IPO) is how companies get listed on the stock exchange. A company uses the capital it raises through an IPO to generate income. Once it starts trading, the issuing company no longer receives money from trades. Out in the open market, the stock price fluctuates as its perceived value changes over time.
Generally, the price of stocks has gone up over the years. But there have been many extended periods of stagnation when the overall trajectory of the markets is more or less sideways. We’ve also had bear markets when the average price of the stock market trades lower over time.
With the advent of the pandemic and the injection of unprecedented amounts of government money into the global economy, stocks surged through 2020 - 2021. As fear of yet another deadly variant eased during the early months of 2022, the Federal Reserve and other central banks began to warn they would be looking to turn off quantitative easing and raise interest rates to combat growing inflation. The resulting dramatic increase in volatility has made it difficult for investors to know which stocks to invest in, even short term.
Traditionally, companies in sectors that do well out of a higher inflationary environment are to be found in the energy and financial sectors. Commodities also do well. The most successful traders and investors take care to diversify their portfolio and keep back enough cash to be able to move with agility when opportunities or unwelcome surprises come their way.