Tracking and Monitoring the Stock Market
The stock market is the ultimate store for trillions of dollars in wealth. Here, corporations in need of capital are paired with people and institutions seeking out investment opportunities. Stocks are a true leading indicator – in that the market discounts future earnings expectations.
Financial media has exploded alongside the digital revolution. Now, it is highly critical that investors learn to filter out infinite amounts of information down to more manageable levels. If not, paralysis by analysis will likely be the result.
Coordinate Investment Strategy
Your investment strategy will determine how you track and monitor the stock market. Heavy traders will demand real-time data, while conservative investors may be happy to review broad market indices quarterly. Financial strategy is dynamic and becomes increasingly complex with more money on the line. More money. More problems.
Stock Market Benchmarks
Align stock market benchmarks with the composition of your portfolio. In America, it is the Dow Jones Industrial Average (DJIA), Standard and Poor’s 500 (S&P 500) Index and NASDAQ Composite that are the three major stock market indicators.
The Dow is a price-weighted average of 30 different stocks, like Microsoft, Chevron, Coca-Cola, and 3M, which are selected to represent the aggregate economy. The S&P 500 is a market weighted index, where Apple and its $2.3 trillion market capitalization wield the most influence. Lastly, the NASDAQ Composite gauges tech economy strength.
It is likely that your portfolio will also suffer through losses when all three major stock market averages are negative. For 2022, the Dow, S&P 500, and NASDAQ are all sharply in the red alongside heightened inflation and a weakening domestic economy.
Further investigation will show the S&P 500 Energy Index rallying by more than 50% through 2022. Oil and gas investments then the lone bright spot for the domestic economy.
Stock quotes, market benchmarks, and technical analyses are very much limited, in that they only present price and volume information. Intelligent investors will always appraise sales, profitability, return on equity, cost of goods sold, and dividend payout history before committing capital.
Expect economic fundamentals to deteriorate sharply amid recession. For individual stocks, annual reports are the best sources for supporting information. Access annual reports through investor relations departments.