Stock Market Movements

The stock market is characterized by its volatility. What exactly causes its rises and falls has several explanations. Some of them are obvious whereas others are not so easily determined. Most of the market movers are of economic, political and societal character.

Some of the factors that cause movement in the stock market have long-term effects while the influences of others are felt only in the short-term. Some of the easily determined market movers include:

1. Inflation
2. Earnings
3. Interest Rates
4. Domestic Political Turmoil
5. Terrorism and Times of War
6. Oil and Energy Prices
7. Crime and Fraud
8. Uncertainty

The last mentioned factor - uncertainty - plays an extreme role in the movement of the market. The stock market is characterized by its unpredictability. Thus, only a little surprise may change the direction toward which the market has headed.

Generally, it is claimed that every investor has equal access to the available information. However, this is not always the case. On the other hand, most investors expect that the stock market is efficient enough to be able to predict events and news in a timely manner so that it can quickly and effectively respond to conditions that has aroused.

If the Fed (the Federal Reserve Board's Open Market Committee) is about to decide on the increase of interest rates by one-quarter, it is expected that even the decision is taken the market will adjust the prices of the stocks to reflect the future change. As a result, after the decision is taken by the Fed, the change in the interest will be unfelt since the market has already done its job.

Different unexpected events, such as economic news or war may take the market out of balance, which may lead to serious financial depression. On the other hand, events with positive light will have a reverse effect by increasing the prices. Unfortunately, today what moves most of the time the stock prices are bad news.

These movements of the market should be of no worry to you since they are of a temporary character. They will soon be alleviated. The knowledge of market movers is important in order to be able to both seize the opportunities offered and avoid the problems that occur as a result of stock market movements.

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For knowledge we can highly recommend you subscribe to the The Wall Street Journal.

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