Why can't stock markets be accurately picked?
Monday August 11, 2008
Stock markets seem to fluctuate randomly to the uninitiated, but to those with more experience, they will often move in response to particular events. While the process of guessing how major events will affect stock markets is far from just guessing, it is still generally only accurate on a large scale, and can rarely be predicted for specific companies unless the event in question directly impacts upon them. Whether buying shares, selling shares or trading CFDs, there is always the risk of suddenly making or losing money.
This unpredictability is not due to a lack of research, however, rather due to a number of factors that include:
The dissemination of information
While a certain piece of news could very easily affect stock markets both adversely or positively, it could also pass by almost unnoticed. Historical reactions of stock markets to certain kinds of events can be indicators to help stock brokers and other professionals to predict what will happen to current stock markets. These can only tell so much, though, as level of media coverage as well as changing public opinions and government action can bring unknown elements into the mix.
Resource booms and busts
The discovery of valuable natural resources can often come unexpectedly. While surveyors and others do their best to predict the resource discoveries that may be made in particular prospects, the exact amounts can differ. Elements such as the prices of shipping and obtaining the resources can also fluctuate, making it difficult to predict the exact length of such boom periods.
Consumer spending
One of the most difficult to predict elements that can affect stock markets is how likely consumers and businesses are to spend. Certain events, such as interest rate rises, can create obvious changes in consumer activity, but the overall effect of this on stock markets can be very difficult to judge.
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