Why Stocks Move: Macro Trends


This post is part of a series about the catalysts for stock movements. It’s based on a series of talks at TradeStation’s Master Class learning sessions. 

On Wednesday, we examined the process of investor rotation. That’s when stocks move based on shifts in buy-side behavior — often without a direct link to fundamentals. Today, we’ll address a something that’s often related: Macro trends and catalysts.

Like investor rotation, macro trends and catalysts are tied to bigger forces outside the company. That’s important because management teams are powerless to control them.

Macro trends and catalysts include:

  • Economic acceleration or weakening
  • Interest-rate changes or currency moves
  • Rallies or declines in commodities
  • Politics

The tariff disputes between the U.S. and major trading partners are a recent example of a macro trend. Companies like Boeing (BA) or Caterpillar (CAT) might have done a good or bad job manufacturing and marketing their products, but no one cared as long as Washington and Beijing were squabbling. Then as tensions eased, months of pent-up demand returned to the market.

You can extend this logic to the economic cycle. Strong gross domestic product growth helps most companies, lifting their volumes and margins (other catalysts we’ll discuss soon). The opposite is true in a recession.

There are similar forces like the price of oil or copper going up or down, which are beyond the control of any individual firm. Semiconductors also tend to have big cyclical swings.

It’s important to understand these kinds of macro trends because they can overshadow fundamentals at the company level. You might have good reasons to love or hate a stock. However, at certain times those reasons simply may not matter.

In conclusion, macro trends can be an important driver for stock movement. They’re not always relevant, but traders who ignore them risk losing money.

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David Russell is Global Head of Market Strategy at TradeStation. Drawing on nearly two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial. Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them appraised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.