The stock market has always been unpredictable:
It is common knowledge that the stock market is extremely volatile and unpredictable in almost all its aspects. It is sometimes even unpredictable to a seasoned investor who may have put in years of experience trading at it and trying to understand it. Yet, an attempt to read between the lines and to try and figure out the future of a company’s stock is important in case you want to not be caught unawares.
Stocks are known for gaining and losing points so rapidly in one trading day itself that sometimes it feels like you wink and open your eyes and the situation has changed tremendously. Staying informed helps you stay abreast and not give you nasty surprises either.
Here are a few pointers that you may watch out for in case you want to understand the real case for such fluctuations so that it does not affect your individual enterprise
Keeping an eye on macroeconomics:
Any change in the world events can point to a fluctuation in the market. If deciphering is your strong point, you can very well tell the effect of any socio-political changes that are happening anywhere in the world.
For example, if there is widespread unemployment in a place then the stocks of the company in the soil may take a beating. Another example is that when there is a credit boom in the market, there is a sales boost in industries such as holiday planning, automobiles, and construction.
Looking out for news stories:
Any story on a particular industry or a company that is being reported can have a positive or a negative impact on the stock of that company as well as others. To cite an example, when the mobile phones came around, the fixed line companies suffered a loss because people were investing in the latest technology.
Watching out for changes in laws and regulations:
Changes in law of the land can trigger fluctuations in the market. For instance, when the food and drugs association bans a drug, the pharmaceutical industry may suffer a bit due to fluctuations that can happen as a result.
The public sentiment:
Theoretically it may sound right that the people invest rationally but in reality, people are investing because of the sentimental value of the company and this has been proven right time and again.
Comparing financial statements of the company can yield a wealth of information:
The ratio of company’s debt to its earning can tell us a lot about why the company’s stocks are so valuable. A detailed study of the financial statements of a couple of years is a good way to gauge the performance of the company and to understand the impact of the fluctuations too.