What actually makes share prices move?
Share prices can move every day, sometimes by a little, sometimes by a lot.
It can be tempting to look for one simple explanation, but markets are influenced by many different factors.
Understanding some of the most common influences can help make day-to-day market movements feel a little less mysterious.
Company performance
One of the biggest influences on a company’s share price is how the business performs.
Revenue, profits, expenses and future outlook can all affect how investors value a company.
Investor expectations
Interestingly, it’s not always about whether results are good or bad.
Sometimes a company reports strong results, but its share price falls because investors were expecting even better performance.
Markets often respond to expectations as much as the results themselves.
Interest rates
Changes in interest rates can affect businesses in different ways.
Higher interest rates may increase borrowing costs for some companies and influence consumer spending, while lower rates can have different effects.
The economy
Employment, inflation, consumer confidence and economic growth all play a role in shaping investment markets.
Changes in these areas can influence how investors view different companies and industries.
Global events
Markets also respond to events happening around the world.
Natural disasters, geopolitical events, trade policies and major economic developments can all influence investor sentiment.
Supply and demand
At its simplest, share prices are determined by buyers and sellers.
If more investors want to buy a share than sell it, the price may rise.
If more investors want to sell than buy, the price may fall.
Looking beyond today’s price
Daily market movements are a normal part of investing.
While it can be interesting to understand why prices move, many long-term investors focus less on short-term fluctuations and more on whether an investment continues to align with their goals and investment timeframe.
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Important Information
This blog has been issued by Instreet Investment Limited (ACN 128 813 016 AFSL 434776) as Responsible Entity of the Raiz Invest Australia Fund (ARSN 607 533 022) and has been prepared without taking into account your objectives, financial situation or needs. Before acting on such information, you should conduct your own review or consult a financial advisor before making a decision to invest. Please read the relevant Product Disclosure Statement and any associated reference documents before making an investment decision. In accordance with the Design and Distributions Obligations, we maintain Target Market Determinations for our Funds. All documents can be found on the Raiz website www.raizinvest.com.au, or calling the Customer Support team on 1300 754 748. Please note that past performance is not a reliable indicator or guarantee of future performance. Historical returns, forecasts, and market commentary are provided for general informational purposes only. All investment carries risk and may result in loss of capital.
