How every stock market trader can win the war against “no profitable returns” before 2030
In the world of commerce, stock market traders transverse a new era of limitless opportunities for profitmaking, yet they’re confronted with a fresh challenge—navigating the intricate intersection between international economic events and the stock market’s performance. Cracking this challenge is the heartbeat of profitable financial investment.
At its core, it entails monitoring economic events such as changes in interest rates, natural disasters, war, and even civil unrest like the Russian invasion of Ukraine. Afterwards, it transcends to interpreting their effects on global economics and knowing when to hedge your portfolio or acquire more profitable investments. Below is a breakdown of how to leverage these economic indicators.
Interest Rate
The ebbs and flow of interest rates largely affect the stock market, influencing the return made on investment and borrowing costs. Low interest rates make borrowing money less expensive, thus encouraging businesses to invest and expand. Progressively, this leads to increased profits, which can, in turn, drive up stock prices. Likewise, higher interest rates result in increased borrowing costs, which can lead to a decrease in borrowing and investments, as well as a slowdown in economic growth.
Moreover, high-interest rates can negatively impact corporate earnings and lead to a decrease in stock prices. This, in turn, may leave traders with no choice but to trade other securities like bonds, consequently leading to a decline in the value of the ES futures. The ES futures are financial derivatives contracts that track the S&P 500 Index and are used to speculate on the future direction of the stock market at a future date and at a specific price. By reflecting the whole stock market status, traders can use the ES futures chart to track the volatility and return of 500 top US companies with their stocks listed on the NYSE and further secure a position in ES futures when they sense a possibility of making a future profit.
In addition to the direct impact on borrowing costs, interest rates can also affect investor sentiment and confidence. In the event of low interest rates, investors may willingly take on a riskier investment, like stocks, in search of higher returns, leading to a heightened stock demand and an increase in prices. Conversely, when interest rates are high, investors will prefer safer investments with lower risk, such as bonds. The resultant effect is a decrease in demand for stocks and a decrease in prices.
War And Civil Unrest
War and civil unrest come with uncertainty and volatility in the global financial system. For instance, the conflict between Ukraine and Russia has had substantial effects on the stock market, both in Ukraine and globally. The most visible impact on the stock market has been a decline in investor confidence, which led to a decrease in stock prices. On 24 February 2022, the RTS Index, a measure of the Russian stock market, experienced a sharp decline of 39% as the invasion began. It rebounded significantly, rising by over 26% on the following day. However, on Monday, February 28, the Moscow stock exchange closed down due to the ongoing crisis.
Once tension escalates between two major countries with prominent international investors, the investors become hesitant to continue investing there. Funds Europe revealed this as 54% of investors in Ukraine and Russia were reluctant to trade in their stock market. 55% opted for a change in portfolio since no one could predict when the war would end. However, these hasty decisions led to a sharp decline in stock prices.
Natural Disasters
The stock market can be significantly impacted by natural disasters such as hurricanes, earthquakes, floods, and wildfires in the short and long term.
The scale of the disaster and the industries hit can both have a significant bearing on the extent of the damage. Hurricane Harvey of 2017 in Texas and Louisiana caused damages of about $125 billion, but surprisingly, US stock still rose 9.5% amidst Harvey’s landfall, meaning that the stock market was not significantly affected —- as shown by the Reuters blog piece.
Supply chains and industrial processes can be immediately disrupted by natural disasters, resulting in lost revenues and profitability for companies in the short term. The stock values of both the companies directly affected and those indirectly affected through supply chain linkages may also fall as a result. Conclusively, the stock market can be influenced by global economic events mentioned in this article. Therefore, it is essential to conduct proper research on these events and their potential effect on the global stock market to make informed inves
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