Does your stocks slide after seeing good results?
For a number of reasons, stocks can slide even when they match market expectations. One explanation is that the market has already factored in the positive news, which explains why the reaction has been modest. Additionally, other macroeconomic or geopolitical factors that could have an impact on the market may worry investors more.
Investors may also have lower expectations if they are worried about future earnings or growth possibilities. Additionally, regardless of how well a firm does in the short term, investors may start to become more cautious or risk-averse, which leads them to sell off shares.
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Stocks Slide: Macroeconomic Factors
Macroeconomic factors are more general economic conditions that have the potential to affect the stock market. It could be one of the factors for stocks slide. For example, the market can be affected by changes in interest rates, inflation and GDP growth.
Changes in the cost of borrowing can have an impact on how much money businesses can invest in growth or give back to shareholders in the form of dividends or share buybacks.
Consumer purchasing power can be affected by inflation, which can have an impact on business sales and profitability. The general state of the economy and the performance of businesses can be affected by GDP growth.
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Stocks Slide: Geopolitical Factors
Geopolitical factors are situations or problems that occur outside the borders of a nation and affect the market. For example, the market can be affected by international political unrest, natural disasters and significant world events such as terrorist attacks or war.
Market turbulence and uncertainty can be brought about by geopolitical events as investors try to determine how they will affect businesses and the overall economy.
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Investors actively monitor news about vaccines and pandemics in addition to these other factors as they may have an impact on the market. As investors try to determine the potential effects on businesses and the economy, for example, an increase in the incidence of a certain disease can lead to greater market uncertainty and volatility.
All of these factors can result in investors revising their expectations for a company’s profitability or growth prospects, resulting in buying or selling the stock i.e. stocks slide.