The time has finally come; it is time for investors to finally admit the undeniable truth:
The United States stock market does not work like it used to anymore.
Confidence in a company’s performance used to be the sure-fire way to invest and make money. Sure, big news would shake stock prices a little, but prices would remain relatively steady and would recover relatively soon. However, within the last decade, stock prices have grown increasingly dependent on news cycles and confidence in other investors, not the company’s performance. This new style of investing, in combination with online and personal trading, has increased volatility significantly. The news dependent stock market can effect individual companies like a false or mislead health scare of a pharmaceutical company, all the way up to the entire stock market. Take President Trump’s recent verbal spat with North Korean leader Kim Jong Un. This sort of potential danger drove the Dow Jones Industrial Average down 3% in two days. Predictably so, the price of commodities increased over the same two days, showing an investor’s lack of confidence in other investors to stay in the market. No news damning to any particular company or industry was mentioned, however, investors retreated because others retreated. The days of sticking out rocky news are long gone, when you can be clear of risk with a simple click of a button.