Thursday, February 22, 2024

How is the Stock Market Affected During Holidays?

Introduction

The holidays are usually reserved times for relaxation and enjoyments. Not many traders are willing to trade stocks at this period. Some traders would consider it as an opportuned profit-taking moment to provide enough cash to spend during the holidays. Only a few smart traders invest during this period when others are busy taking profits. 

The general impact of this on the market is usually an increased market volatility. The market liquidity is further reduced as many traders exit the market. This work has therefore examined in detail the general impact of the holidays on the performance of the stock market. 

Understanding the Stock Market

The stock market is an organized market that brings traders together to invest in the growth and development of a company when they purchase their stocks. Buying a company’s stock is like entering into a contract with the company to contribute money for running the affairs of the company. In return, the company pledges a portion of its assets worth the amount the individual had contributed at that point. 

The individual on his part looks to sell the assets in the future in the hope that the value would appreciate. An important point to note here, is that the value of a company’s asset at each point depends on its financial strength at that point. This means the assets can either appreciate or depreciate over time depending on the company’s growth pace. 

How is the stock market affected during the holidays?

In the absence of limiting monetary policies such as aggressive interest rate hikes; the stock market is known to perform best when there is increased industrial production. When workers are fully active and involved in the task of production at the various industries where they have been employed to work. Increased industrial production coupled with steady supply, often favors the stock market. 

On the reverse, the stock market is often negatively affected during the holidays as a result of the reduction in the active labor force during this period which reduces the production rate. Workers are usually exempted from work during the holidays and some companies could halt production. 

Added to this, the stock market is always exposed to strong volatility during the holidays as many investors often consider it as an opportunity to take profits. Traders prefer to spend money and enjoy themselves during the holidays rather than Invest at this point. Only a few traders would be out, waiting for the bottom to jump in during this period. 

Consequently, the market liquidity is highly reduced during this period which increases the slippage for buying stocks. 

What is the best period for investing in the stock

The best period to buy stocks is during the market dip when their prices are largely discounted. The performance of various stocks is usually affected by economic data released within the month. Some economic reports could be so unfavorable to the market causing prices to fall massively. 

List of best online brokers for stock trading

eToro

FXTM

Robinhood

Webull

Capital.com 

Interactive Brokers 

XTB 

Pepperstone 

Plus500

ATFX

Is stock trading a good investment package? 

The Stock Market is one of the regulated investment platforms that provides the individual an opportunity to benefit from a company’s growth when they purchase their shares. Some companies are known to offer traders dividends which reduces their risk exposure over their investments. Nonetheless, there is no guarantee that the shares of any company purchased will attain any higher level in the future which places the trader’s capital at risk when he invests in stock.