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
