How News Affects the Stock Market


News is ever-changing daily as news presenters report on daily occurrences all around the world. The financial reports include the stock market, and most viewers and listeners believe that the stock market prices change with every new day, but that isn’t the case.

News and Investors

It is important for investors to properly interpret the news and decide whether it has a material impact on their stocks. However, experienced entrepreneurs do not invest by the reporting of an event but in its anticipation. Most news reports are information about already happened events, and it would not be a good decision to make your investments based on current affairs.

It is a good idea for any competent investor to research before investing in any market. It is also important to point out that the news is not a good avenue to conduct thorough research on stock prices. A business person who deals in insider selling may not need the news to keep up with the stock market. These investors tend to have non-public information about the company.

Good News Vs. Bad News

News about the stock market is usually given to the readers in the most simplified forms. Although experienced investors may not rely on the news to fashion their investment choices, the news may leave them a little bit confused on actions to take.

It is advisable to invest in long-term investment plans depending on your investment horizon to avoid the frequent fluctuations of the supply and demand of the stock market. As a beginner, you can seek advice from an investment advisor or a model entrepreneur to avoid making bad investment decisions.

There are investors referred to as conservative stock-pickers. They operate only with the buy-and-hold principle. The buy-and-hold principle allows you to maintain your stock in a company whether the stock falls or not. Investors believe that the company’s stock prices will eventually go up.

Good News

Good news translates into people buying stocks. Good earnings reports, corporate acquisition, the announcement of new products, and positive economic indicators are considered good news. These factors, however, increase the buying pressure causing high stock prices. The good news, in hindsight, is not an indication for you to add stocks to your portfolio.

As an investor, always conduct your research before taking action concerning the news. Some of the sources are not to be trusted, and the information may become confusing.

Pauline Shum Nolan, professor of finance at the Schulich School of Business, favors long-term investments over the short-term. Price volatility due to short-term investments can negatively affect your portfolio.

Bad News

Bad news naturally pushes people into selling their stocks. Bad earnings reports, corporate mismanagement, economic or political uncertainties, or unfortunate events are examples of bad news. In the stock market, bad news increases selling pressure, decreasing almost all stocks’ prices.

An investor must consider all the options before acting upon the information gathered from the news. Asking your financial advisor for the best decision can save you from making a rushed decision. It is smart to be patient when investing your money into any market to avoid frustrations due to poor returns.

When Bad News is Good News

Sometimes, bad news may be good news for some stocks and vice versa. In light of a tragic event, like a hurricane, the utility stocks may go down while the home retailer stocks shoot up. An investor must conduct research and determine how the stock market behaves in terms of stocks decreasing or increasing in price.

Professional stock traders spend most of their time anticipating the next news cycle by getting their information from other sources. They try to stay one or two steps ahead of the curve by selling or buying the stocks before the numbers are released to the public. The information comes from government economic reports, business gossip, or company/industry news.

Unexpected News

Some natural events cannot be anticipated and prevented, like the recent 2020 COVID-19 pandemic. No one could have stopped the devastating effects that people suffered. Investors may have attempted to control the stock pricing, but there was no way of predicting the limitless possibilities.

In a nutshell, chasing the news is not a good stock-picking strategy for any entrepreneur. It would be best if you relied on good research, professional advice, and years of experience to make investment decisions that are positive for your investment portfolio.