Why The Stock Market Is Volatile

Reasons why the Stock Market may be So Volatile Right Now

Over the last few years, our stock market has shocked, and in ways, concerned a lot of lifetime analysts and other professionals. From Donald Trump entering the United States’ presidential office, England’s “Brexit” decision, and ongoing trade wars between China and the United States, we’re going to share all of the major reasons for the general uncertainty in the market and provide insight into what it means for the concerned traders.

Donald Trump Wins United States’ Presidency 

Some professionals have said POTUS Donald Trump’s own words are able to affect the market. There may be some truth in this, but causation is not always correlation. Since Donald Trump has taken office, the US stock market has been up by nearly 20%.

Experts debate on whether this is Trump or just good timing. When it comes to average monthly jobs gained, between Obama’s and Trump’s presidency, the United State’s market actually hasn’t shifted significantly accord to Heather Long from the Washington Post.

Rates show the same growth rates excluding 2009, undoubtably the aftermath of the recession the US experienced due to bankers over extending credit.

But Christine Lagarde, the woman leaving her position as head of the International Monetary Fund to run the European Central Bank’s told 60 minutes, there is no doubt that Donald Trump “holds a lot of keys to stability in the marketplace”.

The US – China Trade Wars.

The next suspect for one of the most powerful reasons there is general volatility in the market is the ongoing trade wars between the two largest GDP’s the world has ever seen: The United States of America and China.

Put simply the trade war began because of the desire to have a more GDP positive effect on the United States government and citizens. Put very very simply, and frankly over generally, the United States wishes to reduce the costs of importation, in order to pass along the savings for the betterment of United States public and private interests.

Meanwhile China has its own best interests in mind and sees the renegotiation as non-viable because of their current financial responsibilities to their own people.This is causing for each player to find each other’s economic weaknesses and quite frankly attack them in order to either offset a loss, in China’s case, or gain a profit, in the United States’ case.

More viably this is felt the most by the automotive, technological, and agricultural fields. The hiked tariffs placed on importation on Chinese goods went from 10% to 25% currently effecting more than $200 billion worth of imports.

Put simply, this causes a strain on production power in China. Because if it’s going to cost 10% more to ship over the same quantity of products when demand hasn’t shifted, this is either going to cause businesses to charge more, downsize to save money, or more realistically take the loss since their profit margins have ultimately become lower due to a higher tariff. 

Even though, raising prices seems like the most straight forward thing for manufactures to do to offset the loss it isn’t always viable. The reason is if prices rise globally while demand remains largely unchanged, competitors that do charge less may take even more business away from the business that already has to absorb a loss. Put simply if Sunglasses go from $20 to $30 but a competitor is selling virtually the same product for $20, the $10 price hike may deter purchases when a comparable product is available for what some would call significantly less.

Brexit: Great Britain’s Withdrawal from The European Union

The final straw in this economically uncertain time is The U.K.’s struggle over whether to pull out of the European Union or not.

The United Kingdom is composed of England, Scotland, Wales, and Northern Ireland. Oddly enough, most people living in the United State’s have very little idea of what Brexit even is nor the impact. Some people wrongly believe it’s the UK’s decision to withdrawal from participating in the Euro; which for the record it is not a part of it since they use Sterling Pounds.

The truth is it is Great Britain’s debate on Exiting- a Brexit if you will- from the European Union.

Why this is such a big deal is because under the European Union, trade standards are agreed upon among 28 different countries. It’s basically a unified trade and monetary body that allows the free flow goods between countries- meaning that one countries products could be sold to another countries without any tariffs or duties to pay.

Standardized taxes are applied, however most service based businesses like law, medicine, tourism, banking, and insurance can operate in all member countries, harboring many economic benefits among the countries.

The United Kingdom is largely split currently on whether or not to stay. Some believe that the UK can make more money by imposing trade tariffs and duties, other experts predict that a withdrawal from the E.U. would cause a UK loss of 4-9% GDP growth over the next 15 years.

Either way, this threatens businesses currently in the country, and a lot of businesses are threatening or relocating currently to Europe before the deadline is met. The loss of local businesses and the cost of tariffs and duties for those not in the E.U. would be majorly impactful on the U.K.’s economy.  

All of this is happening while the US and China are already feuding is creating an economic market that possibly is rather unpredictable.

What You Can Do Now to Offset any Economic Repercussions

There are several basic things you can do currently to offset the possible recession to come. The truth is, most economists do expect a correction. Most believe the recession will be on the milder side,, but some believe it’ll be powerful. 

Regardless the steps you should take to prepare before it’s too late are.

1. Consolidate Debts

2. Secure a job, and a side stream of income

3. Start being more frugal now

Get help with online debt consolidation from Financer.com. Financer.com has services available in 26 different countries and connects you with trusted direct lenders with long term track records of success. By comparing loans, you can consolidate your debt into a single payment that might offer the opportunity to pay less interest overall. Right now, in the United States, loans are at an all time low, with some business, student, personal loans, and more being offered at 6% or less. 

Securing a job and/or form a side business. Having multiple streams of income has always been one of Warren Buffett’s strategies. By finding a job now while the economy is undeniably hot, you can rest assured you can have a bit of a buffer if tough times are to come.

Tuck away money now and start spending less. A pattern has been shown time and time again in the economy. During bull markets people spend much more carelessly, and we don’t mean carelessly in a bad way—people just spend because they feel like they can enjoy their life a bit more. However, during recessions, people drastically cut back on spending because of certain fears and general uncertainty. When a market appears to be potentially heading towards a recession, it’s best to start saving now than later.