Every day political and economic news events are reported, annualized and then reflected in the stock market. Stock prices are either pushed up or down daily based on what investors and traders ‘think’, and almost all of the day-to-day movement is emotionally driven. This week is a prime example. President Trump mentioned the China trade deal might not happen until after next year’s presidential election, the result, a steep fall in stock prices. Why, because investors and traders ‘think’ without a trade deal the world economy will slow or at least be weaker. They may be right. Then again, what if President Trump says tomorrow that negotiations are coming to a close on trade with China.
As an investor you should pay much closer attention to the fundamentals of the companies you own and ignore news events that will not affect your holdings. If you own a U.S. utility company does it really matter what a trade deal with China will mean?
Be very careful of short term thinking it will cause you to trade excessively turning you into a market timer and it has been proven over and over again that timing the market does not work.