Sentiment Analysis and Its Impact on the Stock Market
•By Mahersaham Team
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Welcome and greetings to all of you who are always loyal to Mahersaham. Today I will share an article about sentiment analysis and its impact on the stock market.
Let us prepare a notebook and pen to take notes.
The first sentiment you need to know is the FOMC sentiment. This is the most powerful sentiment that affects the world.
What is FOMC sentiment?
FOMC is related to the economy. Any rise or fall in economic conditions will have an impact on the US stock market.
When the US stock market is affected, it will also impact surrounding stock markets, whether in Asia or other countries.
For your information, there are several effects or sentiments that will occur after FOMC meetings.
Why does the FOMC hold meetings and what is discussed by this organisation?
The FOMC organisation holds 8 meetings per year and reviews economic and financial conditions. It also determines the appropriate monetary policy stance and assesses risks to its long-term goals of price stability and economic growth.
When does the FOMC convene?
The most recent FOMC meeting was held on 16 March – 17 March 2021
An example outcome from the FOMC meeting is that interest rates will rise, and there will also be several instruments that will rise or fall.
a) Instruments that rise
Among the instruments that will rise are the USD — the value of the US Dollar will increase. Additionally, bonds will also rise, referring to lending instruments.
The impact of FOMC decisions will not only cause some instruments to rise but will also cause several instruments to fall.
b) Instruments that fall
The instruments that usually fall are indices, commodities, and metals.
Indices include the Dow Jones, S&P 500, Nasdaq, and others. Commodities include soy bean oil and corn. Meanwhile, metals that will fall include gold, silver, and others.
If the FOMC interest rate falls, the instruments that will also decline are the USD and bonds.
Meanwhile, the instruments that will rise are indices, commodities, and metals.
Next is the NFP sentiment.
NFP is a key economic indicator of the US. This means NFP is the primary key for us to gauge whether the US economy is stable or not.
NFP will report on:
1) Number of jobs added
2) Excluding farm employees
3) Government employees
4) Private household employees
5) Employees of nonprofit organizations.
NFP sentiment is related to the employment rate in the US, whether it is increasing or decreasing.
As we know, the COVID-19 crisis has caused many individuals to lose their jobs, so it will affect the NFP and also the stock market.
When does the NFP result come out?
The NFP result is released once a month at the beginning of each month on a Friday at 8.30am.
What is the impact of NFP?
The impact of NFP sentiment will shake the stock market. It can cause the stock market to go up or down.
The third sentiment is US crude oil inventories. For this sentiment, the US holds weekly discussions.
These meetings are aimed at monitoring the rise and level of oil prices.
The impact of this sentiment is related to oil worldwide.
Additionally, it will also affect global oil price movements and have an impact on the energy sector.
You can study and monitor these sentiments on the websites I have provided. From both of these websites, you can also view updates on US stocks.
All types of current issues happening abroad, whether in the US or other countries, are also available on these websites.
Sentiment analysis is a method of studying investor feelings and opinions towards the stock market. It involves analysing news, economic data, and global events that influence investor sentiment.
The US stock market is the largest market in the world, and its movements affect stock markets in ASEAN countries including Malaysia. A drop on Wall Street often triggers a decline on Bursa Malaysia.
The main factors include economic news, central bank monetary policy, corporate financial reports, geopolitical events, and employment data. All these factors can shift investor sentiment positively or negatively.
Investors can monitor sentiment indices, read financial news, and study market trends to understand market direction. Combining sentiment analysis with technical and fundamental analysis provides a more complete picture.
Want to learn sentiment analysis in greater depth? Open a CDS account with Mahersaham and access exclusive learning videos. Also download our free stock ebook for a basic guide to stock investing.