Risk, risk, risk, risk it all

Risk, risk, risk, it all

The dress is correct, the shoe, e bam…

I’m almost sure this sounds familiar—and that’s because a few months ago, this song was all over TikTok, Instagram, and even WhatsApp statuses, with people doing their best to nail the dance challenge. It’s “Risk” by Victony, in case you missed it.

Day in and day out, there’s always a new trend originating from somewhere—whether it’s a TikTok challenge or X threads, like the recent “we listen, we don’t judge” and its various adaptations. The truth remains: when something eye-catching and seemingly interesting or gainful appears, people tend to flock to it and follow suit.

Interestingly, this phenomenon isn’t limited to entertainment. It happens in financial markets too. When the market moves a certain way, people follow, causing the market to either amplify that direction or pivot entirely. Sounds tricky, right? That’s why we have indicators—when properly studied, they can help you discern the trends and make better investment decisions. Let’s dive in.

1) Economic Indicators

Key economic indicators provide insights into the health of the economy and the direction markets might take.

• Gross Domestic Product (GDP): This measures the total value of goods and services produced by a country. Strong GDP growth typically signals a healthy economy, supporting corporate earnings and boosting stock markets. On the other hand, a shrinking GDP suggests an economic slowdown or recession.

• Inflation: Moderate inflation is considered healthy for economic growth, but high inflation can erode purchasing power. It may also lead to higher interest rates, which can negatively affect markets.

Other global economic indicators include:

• Geopolitical Events: Wars, trade disputes, and political instability can create uncertainty and lead to increased market volatility.

• Currency Exchange Rates: Fluctuations in exchange rates impact global trade and can affect the earnings of multinational companies, as well as foreign investments.

2) Market Sentiment

Market sentiment reflects the overall mood of investors and can influence short-term price movements in financial markets. At times, sentiment can drive markets more than fundamental factors.

• Volatility Index (VIX): Known as the “fear gauge,” the VIX measures expected volatility in the stock market. A rising VIX suggests increasing uncertainty and fear among investors, often leading to sell-offs.

3) Technical Indicators

These focus on short- to medium-term price movements and chart signals to assess future market direction.

• Volume: This measures the number of shares or contracts traded in an asset. High trading volume during price movements often confirms the trend, while low volume might indicate a weak or unsustainable trend.

• Fibonacci Retracement: Based on the concept that markets retrace a predictable portion of a move before continuing in the original direction, this tool identifies potential reversal points in a market trend.

4) Corporate Fundamentals

When investing in individual stocks or evaluating equity markets, corporate fundamentals are critical for assessing growth or decline potential.

• Earnings Reports: Quarterly earnings provide insights into a company’s profitability and financial health. Positive earnings growth generally supports higher stock prices, while disappointing earnings can lead to sell-offs.

• Debt Levels: Companies with high debt may struggle during periods of rising interest rates or economic downturns. Conversely, lower debt levels are seen as a sign of financial stability.

These indicators can guide you in making informed investment decisions. For personalized assistance, chat or call our customer service team at (+234) 812-377-8399 for more information on investment, credit, and asset management services.