The New York Stock Exchange has been operating since 1792. It has outlived wars, pandemics, depressions, political anarchy and at least a dozen times when solemn thinkers have proclaimed capitalism dead. It's still open Monday through Friday, 9:30am to 4pm Eastern. Relentlessly and impressively open.
Understanding what moves US stocks separates informed investors from those reacting to headlines and underperforming.
Earnings reports are the biggest driver of stock prices. https://www.fxcm-markets.com/shares/ Companies report revenue, margins, and future guidance each quarter. Exceed expectations and prices go up. Fail to meet expectations and prices drop. Sometimes strong profits still lead to a drop due to weak guidance. Market is a price of future, not the past. This difference matters greatly.
Everything is overshadowed by the Federal Reserve. All decisions on interest rates spread out to all assets at the same time. An increase in the rates will render borrowing costly, squeeze corporate margins, and render bonds relatively appealing to stocks. The opposite is true of lower rates. Each Fed meeting creates market action, even violent, simply because of the interpretation of language. Market participants scrutinize wording for signals.
An interesting pattern is sector rotation. Money never stays still. When tech stocks perform well, capital flows in. At extreme valuations, institutional capital moves to defensive areas - utilities, healthcare, consumer staples. Tracking sector performance against indexes shows where big money is quietly moving.
Market sentiment swings between greed and fear predictably. The fear gauge is the index VIX, which is an indicator of anticipated volatility. Elevated VIX reflects fear. Low VIX indicates complacency. Traditionally, excessive fear brings out purchasing opportunities. Low fear can signal upcoming downturns. Neither extreme lasts long.
International investors can access US stocks through direct accounts, ETFs like the S&P 500, or leveraged CFDs. They differ in fees, taxes, and risks, making comparison essential before investing.
Historically, active trading underperforms long-term index investing. This is no thrilling piece of advice. It is simply true and never cared about by those in search of quicker profits.
The most underpriced asset in markets is patience. Everyone wants it. Few people do it when it comes to real money.