A look at what's driving markets
The markets are an especially volatile place at the moment. The stock market last week had $15 billion wiped in value in a matter of days mainly due to the ongoing pandemic of the Coronavirus outbreak in China. The virus outbreak has gone well and truly global in that 89,000 people across 58 countries have been affected.
Health epidemics are not the only thing to impact global markets. This article will explore what events happen globally affecting market movements and how you as a trader can capitalize on these movements on the way to profitability.
Governments and Politics
An election of a new government can have a huge impact on the overall stability of a country's currency. An elected government that is seen as radical or unstable can result in Forex traders losing confidence in that particular currency equating to market volatility.
Forex traders tend to keep an eye on pre-election polls for a feel of how things may change within governments and to get a feel of any changes at the top. A change in government can result in a change of sentiment for the citizens within that country which in turn results in a change of approach to monetary and fiscal policy. This is a key driver on the value of that given currency.
Press releases outlining government intentions can dramatically affect markets. Perhaps the most famous example of this power is how one Tweet by President Trump can impact the entire landscape of markets. Most recently he commented that the Coronavirus epidemic was fully under control in the US in an attempt to ease stock market instability.
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War and Disaster
With war there comes opportunity. Whether that be the illicit kind of shady arms deals or the clean kind in going long or short on the value of a currency, there are always investors that keep a close eye in times of crisis.
Most notable is the traction that the stock market gains when the US begins military campaigns abroad. This is not to say that Investors invite or encourage war, but it is uncertainty that investors look for. The US at war tends to breed cohesiveness among US citizens and helps lower volatility. When looking at the war in Afghanistan in 2001, just after 9/11. The DOW fell by more than 8% pre-war yet 6 months after operations began, the DOW climbed by 11.9%.
Natural disasters can impact markets heavily. Floods, hurricanes, earthquakes are all particularly damaging to firms, markets, and investments. Disasters wipe out tangible assets and in areas of manufacturing and production, output is slowed and firms suffer, failing to cope with consumer demand.
Agriculture suffers when crops are wiped out. In times of extreme heat, droughts can occur, impacting maize production and in extreme cases can start a famine.
In August 2005 Hurricane Katrina smashed New Orleans leaving a trail of destruction and taking 1,300 lives with her. Not only one of the most damaging hurricanes in history but one which came at a huge cost. The Insurance Information Institute estimated the damage cost the US economy $45.15 Billion. 400,000 jobs were lost, economic growth slowed and oil supplies were heavily affected.
Epidemics
Health Epidemics drastically affect markets. Throughout recent history, we have seen the outbreak of SARS, bird flu, Ebola and most recently the ongoing Coronavirus.
COVID-19 virus also known as Coronavirus has gripped nations into states of panic. The SARS outbreak in 2002 killed almost 800 people and Coronavirus is eclipsing that figure with the latest casualty list sitting at over 3,000.
In recent weeks US stocks crashed to lows which have not been seen since the financial crisis of 2008. 7 days ago saw billions of dollars worth of value wiped from markets around the world. Investors are now drawing on history for clues in which way markets will move after this latest global epidemic.
At the height of the Ebola outbreak, there were mass restrictions that disrupted freedom of movement, shipping of goods, border closures and quarantines similar to what we are seeing now. Ebola was particularly damaging to regional food security in Africa, damaging supplies of rice, cocoa, palm oil, and cassava to name a few. All crucial products.
When we look at China, it is responsible for some 40% of global trade. With restrictions on the shipping of goods, China's economy is suffering. Further restrictions on international travel have damaged Airlines such as British Airways, EasyJet and Tui. IAG which owns British Airways reported that shares slumped by 17%.
With panic comes market volatility which can be capitalized on if traded effectively. In times of market downturn, many investors look to buy low and wait for a market recovery and ultimately a bounceback.
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Press Releases
It is important for traders to stay current. Do your own research and source information form a variety of outlets to get an overall feel of market sentiment. Research and analysis is key before opening a position.
When considering a broker, search for one that will provide you with some tools to help you on your way to trading success. Many brokers offer educational sections within their sites to help traders keep on top of the latest market news around the globe.
Daily Market Analysis features are ideal to get an overview Stocks, Forex news as well as support and resistance on currency pairs. By using charts with analysis, traders can get a strong idea of future market expectancy.
Economic calendars aid traders in that they display what key events are coming up that may impact currencies. These come in the shape of employment reports, GDP releases, building permits and much, much more.
Investors in the Great British Pound will be keen to see how Sterling behaves off the back of 'Net Lending to Individuals' is to be released today.
Summary
There are indeed multiple factors that affect markets and affect them heavily. What we do know is that factors that are seemingly awful can be taken advantage of by trading. When we think of Cryptocurrencies, they perform well in times of Fiat currencies suffering.
When Cryptocurrencies do not perform so well, it is not always doom and gloom for investors. By going short on times of market downturn, traders can make a profit and eventually gain more Crypto through leveraged trading.
Take advantage on trading on a range of assets including Forex, stocks, and Cryptocurrencies at EagleFX.
Take advantage of Daily Market Analysis features to make the best trading decisions.
Good luck.
This article was submitted by EagleFX.
