Investing Knowhow: What moves the market in the short and in the long term?
What moves the market?
Share prices show the current situation and future prospects of companies. Because assumptions for the future can be interpreted differently, the respective share prices are traded at different prices, which leads to price fluctuations.
In the long term, the share price reflects the fundamental development of a company.
In the short term, the share price shows the average expectation for a company.
What moves the market in the long-term?
The long-term development of the markets is based on the fundamental situation.
Fundamental analyses are used to determine whether value chains of companies and economies are intact. This makes it possible to forecast future returns.
The source of economic development is corporate profits.
Companies create prosperity and progress. Investors participate in this development by providing capital.
The following picture shows a positive long-term development of the profits of a share. As profits rise, so does the share price.
What moves the market in the short-term?
In the short-term, news and sentiment dominate the markets.
Several hundreds of thousands of news items are published every day. Depending on their relevance, these messages move stock prices.
Through the use of computer systems, the news is read and evaluated within a few seconds.
Depending on your investment strategy (you should have one) or their investment strategies, short or long term influencers are key.
If you are a trader, then the short term investment horizon is your focus.
If you are an investor, focus on the long-term influencers.
If you are a trader and investor, you should look at both areas.