Why Do Stock Prices Jump Around So Much?


If you've been checking your portfolio regularly, you may have noticed your balance has fluctuated over the past month. 

After climbing to new highs in January, both the Dow Jones industrial average (which tracks 30 large U.S. stocks) and the Standard & Poor's 500-stock index lost more than 10 percent of their value in early February. While they've recovered a little since, it's been a bumpy ride.

So, why all the ups and downs?

Actually, such fluctuations are normal—if a little exaggerated in the last few weeks. In large part, they happen because of us, or rather, millions of investors like us. Public demand dictates price movements. And en masse, we are very fickle people.

Our opinions about a particular company’s stock—or the stock market, generally—can change based on any of a million different things, from company revenue forecasts to new employment data. When big names in finance speak publicly, their words can also have an immediate effect on the stock market, as investors try to figure out the implications.

When the indexes dropped on March 1, analysts cited testimony by Jerome Powell, the new Chairman of the Federal Reserve, in which he implied the central bank might raise interest rates more than initially expected this year.

Higher rates make debt more expensive for companies (and for us). It also means new bonds issued could offer higher interest rates, leading some investors to move more money into bonds from stocks, which can have a deflating effect on the stock market.

President Donald Trump also announced new steel and aluminum tariffs on Thursday, sparking fears of a trade war, and set off an almost immediate drop in the major stock indexes (though they later rebounded).

The bottom line: Such reactions (or overreactions) are not unusual. Day-to-day volatility is part of the normal market cycle. Not getting caught up in the daily churning of the market is actually one of the best things you can do as an investor.

Remember that over the long term, the odds are in our favor. Over the past 90 years, the S&P 500-stock index has returned 9.8 percent a year, on average. And that includes big bear-market losses, like when the S&P 500 dropped 51.9 percent between October 2007 and November 2008 before rebounding. Despite such big occasional falls, stocks historically have risen significantly over the long run. So your best bet is to stick with them and give your portfolio a chance to recover.

acorns+cnbcacorns cnbc

Join Acorns


About Us

Learn More

Follow Us

All investments involve risk, including loss of principal. The contents presented herein are provided for general investment education and informational purposes only and do not constitute an offer to sell or a solicitation to buy any specific securities or engage in any particular investment strategy. Acorns is not engaged in rendering any tax, legal, or accounting advice. Please consult with a qualified professional for this type of advice.

Any references to past performance, regarding financial markets or otherwise, do not indicate or guarantee future results. Forward-looking statements, including without limitations investment outcomes and projections, are hypothetical and educational in nature. The results of any hypothetical projections can and may differ from actual investment results had the strategies been deployed in actual securities accounts. It is not possible to invest directly in an index.

Advisory services offered by Acorns Advisers, LLC (“Acorns Advisers”), an investment adviser registered with the U.S. Securities and Exchange Commission (“SEC”). Brokerage and custody services are provided to clients of Acorns Advisers by Acorns Securities, LLC (“Acorns Securities”), a broker-dealer registered with the SEC and a member of the Financial Industry Regulatory Authority, Inc. (“FINRA”) and the Securities Investor Protection Corporation (“SIPC”). Acorns Pay, LLC (“Acorns Pay”) manages Acorns’s demand deposit and other banking products in partnership with Lincoln Savings Bank, a bank chartered under the laws of Iowa and member FDIC. Acorns Advisers, Acorns Securities, and Acorns Pay are subsidiaries of Acorns Grow Incorporated (collectively “Acorns”). “Acorns,” the Acorns logo and “Invest the Change” are registered trademarks of Acorns Grow Incorporated. Copyright © 2021 Acorns and/or its affiliates.

NBCUniversal and Comcast Ventures are investors in Acorns Grow Incorporated.