Many factors affect prices in the stock market, and with the broad stroke effects that large market swings can induce, it is always a good idea to take a long-term approach to investing as opposed to trying to time the market. There are many factors that can make the market swing in positive or negative ways.
A rising market is called a bull market and investors are positive. In the shorter term, things that cause the stock market to rise can include: better than expected earnings, new product releases and laws or regulations that positively affect a company.
A bear market is a declining market. It tends to begin with a sharp drop in stock prices across the board. Some factors that have a negative effect include: missed earnings, expired patents that end a company’s exclusivity on a product, lawsuits or management changes. Inflation is also a big factor. Over the long term, inflation is good, because it means consumers are spending a lot of money — the economy is robust. However, when inflation is too high, consumers pull back and spend less, so interest rates go up.
When these types of factors enter the market the sudden rises or drops in stock prices are often called spikes. Spikes are extremely difficult, if not impossible, to predict. That is why you need to look at the big picture, making sure you work to minimize risks associated with these market forces that take their toll on investments over time.
Remember, history has shown that the stock market has risen over the long term. Bear markets and crashes happen, but the market has made a comeback and has risen higher than it ever was before. That’s why it is important to discuss your future plans with your financial advisor and devise a strategy that strives to minimize risks and builds wealth over time.
An advisor will be listed at the Financial Industry Regulatory Authority website at www.finra.org. We also invite you to visit us at mooneylyons.com or call us at 847-382-2600. As a knowledgeable CERTIFIED FINANCIAL PLANNER™, our goal at Mooney Lyons is to help you achieve a good balance between your retirement goals and your financial responsibilities.
Barrymore, John. How Stock Market Trends Work. HOWSTUFFWORKS.
What causes stock prices to rise and fall? 22, How to Invest HQ. Feb. 2012
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. No strategy assures success or protects against loss.