Observing Stock Market Trends

Of the many types of investment trends, stock trends tend to be the most cinematic. You have probably seen movies or shows where crowds of stock traders are gathered around a screen, frantically buying or selling shares as the figures change. But how do they know how the market changes? The fact is that it is impossible to know for surewhich way stocks will go because there are many factors that go into rising and falling share prices. For this reason, the best way to predict where the market will go is by studying stock market trends.

Investors rely on investment trends to identify which stocks to buy and when they should be purchased. By watching the upswings and downswings of a certain stock or group of stocks, and taking into account current trends across the market, savvy traders can determine their stock buying and selling plan accordingly. As previously mentioned, there are a number of factors that determine a stock’s price, including inflation, interest rates, energy prices, oil prices and international issues. These factors can be volatile, leading to unexpected spikes or drops in price – at any time.

Factors That Affect Stock Trends

Stock market trends can be affected in a number of ways by inflation, which refers to a general rise in the prices of goods and services. If inflation is too high, this causes consumers to spend less and companies to make less money, which can lead to investors selling stock because they have lost their confidence in the business or the market in general.

Interest rates can be used to control inflation. For example, when the federal funds interest rate is raised, it causes banks to raise their own rates on loan and credit card accounts. This, in turn, encourages consumers to spend less and businesses to borrow less, thereby reducing the demand that causes inflation. On the other hand, lowering interest rates will increase demand, and thereby inflation, but tends to excite investors because it means that banks will be lending at better rates, encouraging businesses to grow, consumers to spend, and company profits to go up.

Energy prices can also affect investment trends, though only major changes in energy costs tend to have any significant effect. High gasoline prices encourage alternative transportation methods, but this can also cause consumers to purchase less and the stock market to react negatively. International issues, such as political strife or debt crises, also affect the market negatively.

These and many other factors affect stock market trends. It is important to understand these broader trends and then observe the track record of particular companies. Look to InvestorPlace to begin your trend research today!

Page printed from InvestorPlace Media, https://investorplace.com/how-to-invest-archived/stocks/buy-trade/observing-market-trends/.

©2021 InvestorPlace Media, LLC