Ultimate 5 Factors that Shape Market Trends

Market trend
  • Market trends greatly affect the growth and activities of the market. Understanding what factors influence the industry trends and conducing a market trend analysis will help business owners and investors make predictions of the global market state.
  • Some of the biggest external factors that have their impact on shaping the industry trends have to do with economic policies of the country and its regulations.
  • To find out 5 of the most powerful factors that influence the market trends and make your own predictions, just keep on reading.

5 factors that shape market trends

Market trends are the driving force behind the ability for investors to make a profit. The shifting nature of value, either long or short-term, is at the basis for losses and profit. The varying nature in trending environments affects the overall nature of market movement. The following 5 factors that influence short and long-term fluctuations include government influences, international relations, expectation and speculation, demand and supply, and the contributor effect. Understanding how these five factors affect trends over time and conducting proper market trend analysis can help investors predict what trends are emerging, why patterns are holding in various positions, and how industry trends may unfold in the future.

1) Government Influences

Government activity profoundly affects market trends. Governmental financial policies have a major influence on the fiscal marketplace. Simply by decreasing and increasing the country’s interest rates, a government can facilitate national growth. The term for this practice is ‘monetary policy.’ ‘Fiscal policy’ refers to the decrease or increase in national spending which can be used to help stabilise prices and reduce the rate of unemployment. Manipulation of the amount of money obtainable within the open market will determine the nature of investments moving in and out of that country.

2) International Relations

The movement of assets from one country to another has a strong bearing on the country's economy and the strength of the currency. When more money is moving out of the country the nation will experience a decrease in currency value and a weaker economy resulting in those economic factors affecting business industry trends. Countries known mainly as exporters bring more money into the country through services and material goods. These nations can bring a steady stream of revenues into the country and are able to reinvest and stimulate growth within the financial market.  

3)  Expectation and Speculation

Expectation and speculation play important roles in shaping market trends. When financial investors, binary options broker specialists, politicians, and consumers trust the direction the economy is taking. This belief carries into the decisions that direct financial trends. ‘Sentiment indicators’ are used to predict public emotions regarding economic strength or weakness. Indicator analysis can help determine future rates due to expectations, speculation and bias.

4) Demand and Supply

Demand and supply of money, for currencies, products and investments also generates a dynamic that affects prices. Supply and demand change as rates and prices shift. When availability of a commodity shrinks, demand increases and prices rise. When there is an increase in supply above the existing demand, then costs begin to fall. A stable supply results in a push-pull effect as prices fluctuate.

5) The Contributor Effect

Investors and traders help to shape trends. This is due to investment activity based on market information surrounding government's economic policies and activities. These trends often continue even when contributors make inaccurate predictions. When a large body of participants agrees on a market direction, that trend can continue for several years.

Trends and the Bottom Line

It is clear that these five factors shape market trends. Governmental activity, international policies, expectation, speculation, demand, supply and contributor activities combine to effect and shape global market trends.

What is your opinion on the factors that shape the global market trends? Which one is the most important for SMEs of the country?

Charlotte Walker

I'm a WAHM (work at home mom) on a quest to one day have my own start-up. While raising three wonderful children, I'm also taking night classes to learn app development and trying to come up with great ideas that will one day have me sitting as CEO of my own company. :) Give me five years. I'll get there!


Anonymous asks