A market trend is a tendency of financial markets to move in a certain direction over time. Analysts classify these trends as secular for long-term time frames, primary for medium-length timeframes and secondary for short-term periods. Market trend analysis is used to identify predictable price tendencies within a given market and helps traders to make informed decisions about buying or selling stock.
For example, if prices are on the rise in one currency and continue to climb for several weeks, this is considered an upward trend. In contrast, if the price of a commodity falls continuously for several months or years, this is considered a downward trend.
Understanding market trend allows businesses to stay ahead of the competition by aligning their offerings with consumer needs. For example, a rising demand for sustainable products could prompt a business to expand its product portfolio and invest in environmentally friendly practices. Similarly, a decline in foot traffic in physical stores might prompt companies to offer more online shopping options.
Trends are shaped by a number of factors, including consumer preferences, economic conditions, external events and demographic shifts. Whether they are long-term fads, seasonal patterns or industry shifts, identifying and leveraging these trends is a vital compass for navigating the ever-changing marketplace.
Understanding how to spot a trend starts with knowing your target audience. For example, a McKinsey study found that 18-24-year-olds in emerging markets are twice as likely to spend money on premium goods and services. This insight informed Unilever’s strategy, which led to growth in its sustainable brands.