The Stock Market’s Wild Ride: What Should You Do?
Learning about how macro economic news impacts your investments is the best way to protect your hard earned assets. The first month of 2015 has seen triple digit jumps and declines on at least eight occasions in 2015 so far. The things that are affecting the market are, the plans for the fed to raise rates, unstable oil prices, fear of a correction, and the effects of a cheaper Euro.
Learn how all these individual events affect the market.
The impact of these economic events cascades over scores of other issues, from consumer spending and corporate profits to global politics and monetary policy. Identifying who and what might be impacted, how the impacted parties will react and whether that will cause a second cascade of reactions is complicated and prone to error.
The one thing that is a common misconception is that deflation is good for the economy because it’s the opposite of inflation which everyone keeps an eye out for. Deflation can hurt the economy and cause instability because when consumers see prices falling they might opt to wait delay major purchases which have a waterfall effect to industries. This lowers demand for a business’ products which causes less buying of raw materials and less hiring and/or layoffs. Second deflation relates to how attractive borrowing is. All interest rates businesses or individuals can borrow at are adjusted for inflation. So when a company goes to borrow money if there is no inflation built into interest rates because of deflation governments that are lowering their interest rates to stimulate the economy have little effect on the overall interest rate at which business can acquire loans for.
Read more about deflation and the other causes of volatility in the stock market.
About Shaun Archer Tatum Shaun works in corporate finance in New York City. He has done financial consulting for several start-ups and has worked at several Fortune 500 companies. He has contributed several finance/investing articles on Seeking Alpha which have been published on Yahoo! Finance.