The stock market can sometimes seem unpredictable, but the truth is that it generally reacts to certain types of news and events consistently. This allows traders to analyze breaking news to decipher the market’s next move. Both long and short-term predictions are made based on this data and both impact market volatility. One example of this is the cost-of-living crises hitting many economies around the world. The UK and US are feeling these effects more than others, with inflation soaring to heights not seen in decades.
What does this news mean and how might stock markets react to a continued cost-of-living crisis?
Retail stock drops
One of the first areas where a cost-of-living crisis shows is retail stock. When the economy stumbles and consumers must cope with rising expenses, they tend to buy less and save more. This means that retailers often see record slumps in profit, and the stock market drops accordingly.
Leisure spending slumps
Some industries rely heavily on tourism. This includes areas where tourism is a major source of funds, such as Southern California, where visits to the Disneyland Resort poured $8.5bn into the local economy in 2018. When cost-of-living crises descend upon the population and people begin to stay home more, some of the first industries hit are travel and tourism. That significantly decreases the amount of income the related industries and local economies can expect.
Hand-in-hand with this drop are entertainment industry woes. Not only are people more likely to save their money and stay at home, but traveling for tours, concerts, and shows becomes more expensive.
This lack of spending naturally causes the market to fall.
As economies worsen and the population struggles under the weight of increased costs of living, investors around the world take note. This is especially apparent when it comes to exchange rates and inflation. As economies shift, currencies are also in flux. Some believe that the pound sterling could drop to parity with the US dollar and the euro.
The looming recession widely predicted to hit the US within the next few years, the natural consequence of rising costs of living, has many investors pessimistic about the value of their holdings. In fact, traders are largely concluding that the economy is headed in that direction and a cascading effect of selling has hit the market.
Stay caught up on the news
The best thing you can do as financial upheaval looms is to look for expert analysis about the market and the ways in which it stands to change. LeapRate is an excellent source of information thanks to its industry professionals, who have a wealth of experience and dedication in tracking the economy and its impact on the stock market. Make sure that wherever you get your information, it comes from trusted sources experienced in stock market fluctuations.
What do you think the rising cost-of-living means for the stock market? Stay tuned for more breaking news analysis of the stock market right here! We cover the stories you need to know about.