Market fluctuations are inevitable and expected. They always have been and always will be. In fact, they’re such a significant reality of investing that I named my YouTube series of brief investing videos Up and Down.
Often, our clients ask, “What makes the markets move up or down?”
There are quite a few factors that cause a shift in the markets. Some relate to the economy, some to specific companies and others to investor behaviors and psychology.
Economic factors that impact the markets include the gross domestic product (GDP), inflation, interest rates, government fiscal and monetary policies and unemployment. Company-specific factors include corporate earnings, industry trends, news reports, and share dilution (when a company issues new shares to raise capital, thus increasing the supply of stock). And finally, factors related to investor behaviors include market sentiment, social media reports and powerful emotions, such as fear and greed, shared by a significant number of people.
How company earnings cause market shifts
Of those factors, one that has the potential to create major market shifts is earnings — more specifically the earnings and profitability that companies included in the major indexes receive from producing and selling goods and services.
Earnings reports can change investor sentiment and future outlooks. When that happens, stock prices are affected directly, creating a ripple effect across the markets and within specific sectors. When company earnings exceed expectations, stocks often rise, and when their earnings are lower than anticipated, prices usually drop.
In the United States, there are just under 4,000 publicly traded stocks that can be categorized into 11 global industry classifications (GICs). With their performance changing daily, the market can be affected in many ways.
Here’s an example of how even news of a company’s potential performance can cause a shift in the markets.
At the end of August 2025, the stock market saw a significant rally following news that Federal Reserve Chair Jerome Powell might cut the interest rate in September. That news lifted the Dow to an all-time high and benefited megacap tech stocks. But then later in the week, the rally cooled and resulted in a pullback as investors took profits and awaited Nvidia’s quarterly earnings report. Investors were focused on key economic indicators like the Personal Consumption Expenditures (PCE) Price Index and upcoming nonfarm payrolls data that help gauge the future path of interest rates.
Many investors aren’t watching long-term company earnings, however. They focus on those day-to-day factors that move the markets — the constant volatility. There is a lot of noise around daily market moves; in the end, these short-term shifts don’t make a difference for investors focused on their long-term goals.
We see traders constantly getting in and out of the market, trying to time it, in the process worrying themselves sick over the hour-by-hour value of their portfolios.
What we do here at FORM Wealth has nothing to do with any of that!
We work with our clients to determine where they are now and where they want to be. The customized financial plans we design enable them to focus on their goals without worrying about what the markets are doing. Long-term investors are not gamblers or speculators. They don’t waste their time and energy trying to anticipate what the markets will do.
Instead, they trust that the plans we’ve designed for them and the expertise and experience we have in asset management will result in the best possible outcomes for them.
We focus on the fundamentals, including company earnings
Here, we focus on the fundamentals, and company earnings are a big component.
Companies report what they think their earnings will be in the next couple of quarters, and they usually project a year in advance. And most companies beat earnings expectations on a consistent basis.
Yes, there is a lot of uncertainty about the markets. However, there are trends we can follow that give us a pretty good idea of what we can expect. For example, in August, companies report that they expect to earn more profits than they did back in March or January. They are increasing their expectations. If enough companies increase their earnings expectations, the markets are going to move higher.
When we focus on the fundamentals, such as what companies tell us will probably happen, we don’t have to react — or overreact — to the day-to-day uncertainties.
We’re worrying about the markets, company earnings and your portfolio’s value for you. What we need from you is to keep us up-to-date on your situation and your goals. We need to understand what you need in the next 12 months. What funds do you need to make sure you can enjoy your life now? What funds do we need to invest so you can enjoy the life you want to have in the future? Have you experienced any life transitions lately that might change your financial plan? We will adjust it accordingly.
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If you aren’t one of our clients and you’re dealing with an advisor who wants to keep showing you pie charts or keep talking about why you should get in and out of various investments, it might be time to have a conversation with us. I encourage you to reach out to us for a second opinion on your current financial plan or anything else we can do to be of service to you.
