The Effect of Public Opinion on Trading

Hi everyone, this is my second post on the basics of trading (check out my last post here)

I wanted to talk about how public opinion affects trading, but before I start let me say what I am NOT writing about here.

There is a lot of conjecture and debate on how public opinion affects trade policy. For example, an number of scholars have spoken on how in democratic nations public support for free trade lowers tariffs, and a few other things on how that situation is somewhat symbiotic with the desires of the consumers is significant. Blah, blah, blah.

Trade policies worldwide are an important thing to keep an eye on, but not overly so (let’s leave that to the analysts shall we?).

What I AM writing about today is how public opinion and good and bad press (which is biased for profit, if that isn’t obvious) affect trading when it comes to stocks and other assets.

This is a concept you are already familiar with to one degree or another as an individual, you just might not understand how it relates to how it can affect you as an investor and trader.

Here is an example of what I am talking about.

Consider what happened when Nike took a hit to their stocks when celebrity golf super star Tiger Woods got caught cheating on his wife with more than a dozen different women.

The scandal was everywhere and was talked about by everyone, which while good (sort of) for Tiger’s celebrity status, caused Nike, who had been using Tiger as their poster boy for a few years, had a black eye.

I just realized that could be taken as a racist slur against Tiger, but honestly; if that is where you go with that, just go away. No offense intended.

Nike’s popularity took a hit the way that Subway (the sandwich) did with the underage prostitution charges filed against their spokesman Jared (though that was perhaps more than a black eye).

This scandal caused Nike’s evergreen stock values to drop by a full 5% margin. Doesn’t seem like much, right?

It is if your company has billions of dollars in assets!

So you see how public opinion can hurt trade values from an outside perspective?  Check out this video!

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