The New York Stock Exchange has been operating since 1792. Through wars, pandemics, crises, and repeated claims of capitalism’s death, it has endured. It's still open Monday through Friday, 9:30am to 4pm Eastern. Relentlessly and impressively open.
Knowing what shifts US stocks will make informed investors and those who respond to headlines and wonder why their portfolio continues to perform poorly.
No other factor influences individual stock prices like earnings reports. fxcm Companies report revenue, margins, and future guidance each quarter. Exceed expectations and prices go up. Miss expectations - stock declines. At other times a company may record high profits and the stock declines due to a poor guidance. Market is a price of future, not the past. This difference matters greatly.
Everything is overshadowed by the Federal Reserve. All decisions on interest rates spread out to all assets at the same time. Higher rates increase borrowing costs, pressure profits, and make bonds more attractive than stocks. The opposite is true of lower rates. Each Fed meeting creates market action, even violent, simply because of the interpretation of language. Market participants scrutinize wording for signals.
An interesting pattern is sector rotation. Money never stays still. Strong tech performance attracts more investment. At extreme valuations, institutional capital moves to defensive areas - utilities, healthcare, consumer staples. Following the performance of the sector in comparison to the overall index shows where the big money is silently flowing ahead of the news.
Market sentiment swings between greed and fear predictably. The fear gauge is the index VIX, which is an indicator of anticipated volatility. High VIX values are indicative of panic. Low VIX indicates complacency. Historically, extreme fear creates buying opportunities. Extreme complacency often precedes corrections. Both extremes are temporary.
International investors can access US stocks through direct accounts, ETFs like the S&P 500, or leveraged CFDs. Each option has different costs, taxes, and risks, so comparison is important.
Historically, active trading underperforms long-term index investing. It’s not a glamorous insight. The truth is often ignored by those seeking fast gains.
Patience is the most undervalued asset in markets. Everyone desires it. Few actually practice it with real money.