Stock Market Volatility Factors

by Sam Ashe-Edmunds

No matter how careful you are in researching specific securities before you buy them, factors as diverse as politics, war and famine can affect the value of your portfolio. Understanding what affects the prices of stocks, bonds, precious metals and commodities can help you determine whether to buy, hold or sell during market swings.

Economic Trends

When a national or regional economy is performing well, energy use and prices will rise, along with stocks. Precious metals and bonds may decrease in value. Bad economic news reverses those trends. Rising employment can signal inflation and higher interest rates, which affect the market. When the U.S. Federal Reserve System raises or lowers interest rates, the American stock market can see significant up or downswings. The severe American unemployment that began in 2008 affected America’s budget deficit, eventually contributing to a downgrade in the U.S. bond rating in 2011 and a corresponding market drop. Reports on housing starts, employment rates, consumer confidence and quarterly earnings also affect the market’s short-term performance.


Election results often raise or lower the stock market, based on traders’ perception of what the incoming party will do legislatively. If one party wins the presidency and the majority of seats in both houses of Congress, for example, the market might react quite differently than if the other party does so. The fall of a ruthless dictator in a key oil-producing regime might be a positive in terms of human rights, but instability after his departure can cause oil prices to spike and a corresponding ripple effect among bonds, gold and other securities. When the Soviet Union invaded Afghanistan in 1979, gold spiked dramatically.


Weather affects the stock market in a variety of ways. Mild weather decreases demand for oil and gas, sending the energy sector lower. Drought or freezes affect crops, making commodity prices unstable. The tsunami that hit Japan in March 2011 caused significant damage to Japan’s economy, including the automobile industry. Tsunamis, tornadoes and hurricanes can have a positive affect on markets, however, as increases in needs for building materials temporarily lift the construction sector.

Sector Trends

Innovation is not always a good thing when it comes to the stock market. While mobile communications devices seem to be a positive innovation to which consumers are flocking, their proliferation may also hurt the stock market. The tech sector includes large players such as Dell, Intel, Hewlett-Packard and IBM, whose fortunes are tied to the success of personal computers. As consumers begin curtailing their use and purchases of PCs, makers of chips, software, monitors and hard drives might see their stock values decline.

About the Author

Sam Ashe-Edmunds has been writing and lecturing for decades. He has worked in the corporate and nonprofit arenas as a C-Suite executive, serving on several nonprofit boards. He is an internationally traveled sport science writer and lecturer. He has been published in print publications such as Entrepreneur, Tennis, SI for Kids, Chicago Tribune, Sacramento Bee, and on websites such, SmartyCents and Youthletic. Edmunds has a bachelor's degree in journalism.

Photo Credits

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