Why Foreign Investors Should Pay Attention to American Economic News

The news cycle is closely tied to the stock market. This is true whether you're investing in the US, the UAE, or somewhere in between. As a foreign investor in the US stock market, keeping your finger to the pulse of American news is key.

How American news impacts the US stock market

Domestic news impacts the US stock market directly. In general, there are two types of news:

• Good news

• Bad news

Here's an explanation of how the different types of news could impact your portfolio.

Bad news can be tied to a specific company, industry, or entire market. If a company has a poor earnings report, lawsuit, or some sort of scandal, it can cause shareholders to sell the stock. Just look at Activision Blizzard (NASDAQ:ATVI), whose stock plummeted after reports surfaced about harassment in the workplace.

If an industry is struggling from supply chain issues, labor shortages, or other issues, that bad news can impact the whole sector. This can be seen in the tech selloff that occurred in September 2021.

An entire market can also struggle or crash, as evidenced in February 2020 at the onset of the COVID-19 pandemic.

On the other hand, good news can cause an upswing. For a specific company, positive earnings reports, mergers and acquisitions, and other occurrences can cause people to buy a stock. For example, stock for electric lighting materials provider AZZ Inc. (NYSE:AZZ) rose higher after beating earnings expectations in fiscal Q2 2021.

If an industry is thriving—like CRISPR biotechnology in 2020—the entire sector sees a boost.

Markets can increase as a whole on positive news from the Federal Reserve or other economic factors.

When bad news is good

The stock market isn't as simple as bad vs. good. Sometimes, bad news can make certain stocks rise. For example, stay-at-home stocks like Peleton (NYSE:PTON) and Chewy (NYSE:CHWY) did well during the pandemic, even when other stocks struggled to reach pre-pandemic levels.

International news matters to the US market, too

The Evergrande crisis is taking the world by storm in the fourth quarter of 2021. The Chinese property developer is $300+ billion in debt, and the Chinese government may bail them out or let them falter. Evergrande is a massive company, and its impact can be felt worldwide.

This is one example of how international news matters to the US market. The US doesn't live in a vacuum, and being aware of geopolitical and economic news beyond American borders is key.

Simple ways to stay informed as a foreign investor

Sign up for a newsletter. Some of the biggest US stock market newsletters include Morning Brew, InvestorPlace Digest, and Morning Squawk (a before-the-bell roundup).

Set up Google alerts. Use terms like technology, supply chain, retail, or any other phrase to target relevant topics.

Listen to podcasts. Discover options like The Indicator from Planet Money, Motley Fool Money, and NPR's Marketplace.