Current Market Trends
Today’s special episode on current market trends is in response to the dramatic changes we’ve seen in the stock market over the last week. There has been unrest in the financial world that has mimicked the chaos in our geopolitical world. The news that Russia invaded and declared war on Ukraine has had repercussions far and wide.
If you have been following along with our podcasts, and you have done your due diligence researching companies, this unrest may present a financial opportunity. As a value investor, a big drop in the market may be the opportunity you have been waiting for to buy into a company.
First let’s discuss why the market goes up and down. When there is demand for a stock and supply is low, the stock price will go up. When demand goes down, people sell the stock, the supply goes up, and price goes down.
We next need to understand why people may buy or sell stock. We often refer to these reasons as events. A recent event that caused fear and led to a drop in prices and a crash of the market was COVID-19. These events are often expectations and concerns before something happens within the company. Everything from small scandals to global wars can cause the stock prices to drop, and recovery may be short lived or extended.
Similarly, interest rates can affect stock prices and buying and selling. When interest rates are high, companies presume they may not have the same amount of money or cash flow coming through, ultimately affecting their production, profits, margins, etc. Stock prices may end up falling. Currently, in 2022, there is talk of an interest rate increase in March, when rates are set to change. This fear could also contribute to falling stock prices.
Lastly, emotion affects the buying and selling of stock. At times, investors feel various emotions including both fear and greed causing them to both buy and sell stocks at certain times. Keeping these emotions in check is important so as to not get caught up in the short-term fluctuations of the market.
In our podcast, we discuss value investing. We expound the benefits of doing research and investing for the long-term. Historically, as a long-term value investor, stocks do tend to recover. However, these drops in the market can be an opportunity to buy stock. If you make an educated decision and follow the rules we have discussed, this may be the time to make a move. Remember to keep your emotions in check and don’t be impulsive. It’s also ok to sit this out and just watch what happens and experience and learn from an event like this too.
And, in this turbulent time, our thoughts are with those being affected by the war. Stay safe and be well.
Listen to Podcast Episode #41 here https://stocks4docs.org/podcasts/ to get all the details on what you need to know about current market trends.
And subscribe to the stocks4docs podcast https://stocks4docs.org/podcasts/ to learn more about investing, personal finance and more!