Understanding Stocks

14
C H A P T E R
What Makes
Stocks Go Up
or Down
When you invest in the market, you should pay attention to anything
that may affect your stocks. Some events seem to come out of
nowhere—perhaps a terrorist attack, a war, or a recession will cause
havoc with the stock market. If there is anything the markets hates, it is
uncertainty. One of the reasons the most recent bear market lasted so
long was that no one knew when the recession would end, whether we
would win the war on terrorism, and whether the United States was
going to war. Any one of these events can send the market lower as
investors seek protection in cash, gold, or real estate.
As an investor or trader, you must be aware of outside events.
Sometimes it helps to step back and see the bigger economic picture. If
you can anticipate how an event could affect the stock market, you can
shift your money into more profitable investments. Some pros believe
that having a thorough understanding of the investment environment is
more important than picking the right stock.
149
Copyright © 2004 by The McGraw-Hill Companies, Inc. Click here for Terms of Use.