Understanding and forecasting movements in global financial markets

Today’s markets are characterized by more fast movements and volatility than ever. To understand how exactly they move, though, one needs to be aware of the forces, acting like engines and driving the markets in a certain direction, and that is not as simple as it sounds.

Those forces can vary, which makes them even more unpredictable. One tweet from Elon Musk about Dogecoin, for example, and its price skyrockets. One report about high unemployment figures in the US and the Dollar can take a hit. The forces moving the markets are various, but getting to know them in advance can help you spot them, and prepare your trading strategy accordingly.

Key drivers of movements in global markets

  • Increased liquidity due to the advent of a new generation of retail traders. The recent GameStop saga truly shows the influence of retail traders – especially those who think outside the box – on the Given how simple trading on smartphones via apps like Easymarkets is today, from anywhere and at any time, many new and young retail traders are taking part.

These younger traders are not as patient and obedient as their predecessors are. They are willing to make unconventional decisions in order to change the rules – and that’s why their sentiment should be taken into consideration.

  • Bond yields and movements in the bond markets. While bonds are not considered popular instruments by professional traders, they are more than just They also help traders and investors assess how the whole economy is doing.

Higher bond yields mean that the cost of borrowing money for governments and corporations is going up, and that investors have weaker trust in the future performance of the economy or the company in question. Because of this, bond yields often influence the moves in the equity markets as well as currency pairs. A wise investor keeps an eye on bond yields.

  • Economic and earnings reports. Reports are a good guide for investors on how well the economy is performing. The Nonfarm Payrolls Report, which highlights employment in conditions in the US, the Purchasing Managers Index, the Consumer Price index and others are good examples.

Aside from that, earnings reports issued by companies also show investors how well a specific company is performing. Positive reports usually lead to positive price movements, and vice versa. There’s more to that than the general sentiment, though. If investors expect bleak numbers and the reports show surprisingly good ones, then a positive shock can cause a spike in the price. This element of shock matters as well.

  • Statements by politicians and market decisions. Key personalities (like Trump when he was US president, Elon Musk, and the head of the Federal Reserve Jerome Powell) can move markets with a single statement. Be sure to follow important figures and to hear what they have to say.

Summary

There are multiple factors that influence markets, and the abovementioned ones are just a few. Taking into account these factors can make your trading more complex, but it protects you from some unforeseen risks.

Posted in: Personal Finance

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