Understanding Stock Fluctuations

Posted by Jeremy Wascak April 17, 2018 Categories: Investing Retirement Saving Stocks
 
If there’s one constant in the stock market, it’s that the stock market is never constant. It will continue to fluctuate every single day.
This means share prices are constantly rising and falling. Consequently, so do the market values of stocks and companies. This happens as a result of changes in the supply and demand for the stock. 
 
These fluctuations can affect your retirement savings and other investments on a daily basis and cause concern. Its always important to seek investment advice from duly licensed investment professionals. 
 
That said, it can be helpful to understand what is causing these swings. To break it down further, when more people want to buy a certain stock than the number of people who want to sell it, the demand – and the stock’s price – will go up. However, when the sellers outnumber buyers, the price drops.
 
The obvious question, then, is: What makes people want to buy or sell a stock?
 
There’s no one answer to this loaded question. Stock fluctuations can be caused by any number of factors.
 
Here are some reasons a stock may go down:
 

Earnings are dropping

Sales are slipping

A top executive leaves the company

A well-known investor sells their shares of the company

A lawsuit is filed against the company

A market analyst downgrades their recommendation of the stock

The company loses a major customer

Many people sell their shares of the company

A company factory burns down

Other stocks in the same industry go down

Another company introduces a better product

There’s a supply shortage and the company can’t meet demands

Scientists discover that the product isn’t safe

A new law impacting sales or profits is introduced

Negative rumors begin to circulate

Local acts of terror cause uneasiness

Concerns over inflation or deflation

Fluctuating interest rates

Technological changes

Natural disasters

Extreme weather fluctuations

Negative company reviews on social media

Political elections cause directional uncertainty



 

Here are some reasons a stock may go up:
 

Increases in earnings and sales

The company is under great new management

An exciting product or service is introduced

The company lands a big contract

There’s a great review of the company, or new product, in the press or social media

Scientists discover the product is good for something else

A well-known investor is buying shares

Many people are buying shares

An analyst upgrades their recommendation for the company

Other stocks in the same industry go up

A competitor closes shop

The company wins a lawsuit

The company expands globally

The industry is hot

The company’s product is in high seasonal demand

Positive rumors or speculation

Optimistic market conditions

A fantastic marketing campaign

This is just a small sampling of some factors that can make a company’s stock go up or down. It can happen for any reason at all. What’s important to remember, though, is that investing will never be a smooth ride – fluctuations are a normal part of the market. No shareholder is immune. Be prepared for your stocks to fluctuate, sometimes dramatically. When it happens, unless conditions in the market are extreme, you simply need to hold on and wait for things to change course.

The above references an opinion and is for information purposes only.  It is not intended to be investment advice.  Seek a duly licensed professional for investment advice.
 

Jeremy Wascak
Director of Member Development, Everyday Finance Contributor 
​​jeremyw@towpathcu.com
​330-664-4700