The world we live in today is a global village where geographic distances matter the least. Thanks to technological advancements, information disseminates and propagates across the globe from sunrise to sunset in a seamless fashion. With consumer sentiment being the top most predictor of the fate of any underlying stock, news which shape such sentiments are the biggest influences on any market including the financial markets. Everyday there is a new wave of events that travels fast to remotest parts of the world through online media and publications, thus creating very difficult to break web of influence. News seeing the sun in Beijing travel from Amsterdam to the Emirates and New York within a matter of few seconds amplifying the recipient’s response to global scale very fast.
To this end, there is no way to see the market pacify with lower volatility anywhere in the near future. Call it crazy, but market analysis pundits advocate the trend saying quite often the sentiment, rapidly shifting market’s trajectory has a definitive and legitimate factor behind it. A few such triggers will be discussed hereunder,
- Government and its policies
Generally, the legislative intervention of public policy triggers important landscape changes on local and national scale. However, the impact could amplify to a global scale if the policy maker is a large economy of the world. For example, the U.S. debt deficit, tax reforms or recession can influence remotest markets like Islamabad or Mumbai. Also due to global convergence of markets, news has a global impact. A shift in Chinese Yuan could have a far-reaching impact for example in the global Forex market as well as all businesses, which denominate their deals (for one reason or another) in Chinese Yuan. In addition, regional policy making by initiative like EU and the G-20 can be a market stimulus with global impacts.
Not all market Sentiment has qualitative backing from fundamentals of the market. Sometimes it can be inherently whimsical, a creation of the wandering minds. As markets grow mature, however there are sophisticated ways to tell the legitimate sentiment from others. There are formally designed sentiment indicators, which can predict the feelings of a group of people based on real data from relevant population. Such Sentiment Indicators are used, to make quantified assessment of the impact of environmental factors like inflation, public policies, unemployment, political moves on any future market movement.
Aside from the fundamental and technical analysis, sentiment indicators tools can also create a negative or positive buzz on the market. Because sentiment indicators are based on analysis of data collected from real markets their impact is a truthful representative of the market trends. Expectations and informed evaluations from sentiment indicators are more reliable than the shock wave effect created by news and media interventions.
- International and Domestic Issues
Any kind of political or administrative unrest kike war, dictatorship rule, civil unrest and general factors contributing to public and investor fear s like terrorism, corporate scandals, are the biggest hurdles in the growth of foreign investment for a country. Similarly, issues having impact on the international trading like the energy crises, supply and demand crises, Gulf War etc also affect the market prices to a varying degree. The threat of Syrian war was one such global impact that caused a downturn in equities markets of Asia, Europe, Americas and the Middle East, while oil prices surged in the commodity exchanges. This is why traders and forex brokers are very keen with these issues so they can adjust their startegies necessarily.