Stock prices are always on the move whenever the stock market is open. The price swings come into being as a result of changes to the forces of supply and demand. The fluctuations come into being as investors and traders react to varying developments on the global scene as well as fundamentals affecting the overall market as well as individual companies.
Below are some of the factors that trigger stock market fluctuations
Bank Interest rate
Bank interest rate changes is one of the major factors that influence fluctuations in the stock market. When the bank rate is low, then customers can borrow money with ease, given the reduced amount of interest they will have to pay. The reduced cost of borrowing allows customers to borrow money that they, in return, use to speculate on stocks.
Likewise, whenever interest rates rise, the cost of borrowing rises, making it difficult for customers to borrow. Lack of enough money in circulation also translates to reduced speculation activity in the equity markets.
Institutional Investors Buying behavior
Institution investors are investors who are able to place big orders that can pull the market in a given direction. Whenever such investors buy a given stock, they cause a ripple effect in the market that, in return, causes retail investors to buy stocks as well, causing the overall market to move in a given direction.
Similarly, whenever institution investors sell stocks of company, small investors also follow suit, consequently causing the overall stock market to trade lower.
Companies Financial Position
Companies’ financial position is one of the fundamentals that value investors pay close watch to when making investment decisions. A company or companies with good financial positions attract huge investments from investors, a move that result in big buy orders causing the stock market to trade higher.
Likewise, deteriorating financial positions of companies are known to trigger sell-off in the stock market on investors offloading their positions in pursuit of other high yielding investments.
Geopolitical tensions and Political Uncertainty
Political uncertainties in some of the biggest economies, as well as geopolitical tensions many at times, spook investors resulting in increased sell-off in the market. Such uncertainties cause investors to pull their capital form the equity market into safe havens such as precious metals, consequently resulting in the broader stock market downtown.
Likewise, in times of political tranquility, stock markets tend to rally given the friendly environment created for doing business.
Breaking news have the potential to trigger wild swings in the broader stock market. Negative news such as economic and political uncertainty rattles investors resulting in an upsurge in sell-orders in the market. Similarly, positive news causes individuals to buy stocks in plenty, causing the stock market to trend higher.