Elon Musk’s tweets move the price of Bitcoin, Tesla and Gamestop up and down in a snap of the fingers.
The pharmaceutical industry impacts how the S&P500 index feels. Bank of America warns its clients in an official note that when Trump tweets a lot, markets tend to fall.
How do financial analytics manage to forecast the price movements if the correlations on the market are so vague and unpredictable?
The answer lies on the surface. It’s written in any economics textbook that the price is the direct result of the demand and supply balance. Short-term market manipulations may affect the prices of the assets in the nearest future. However, they can’t impact the solid foundation of real goods and services demand, which lies beyond the short-term speculative sentiment. In other words, the price may get volatile because of a few words said by a celebrity, yet it will inevitably get back to fair values in the longer-term perspective.
An investment approach that ISEC Wealth Management practices is based on fundamental laws. The longer is the scope of investments, the less are the risks of short-term volatility negative impacts on the overall results.
Source: cnbc.com
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