Now that the fourth quarter of 2021 is well underway, analysts are trying to make sense of a confusing set of indicators of general economic sentiment to gain a better understanding about the direction of the stock markets. Right now, there's almost zero consensus on the topic, but the first three quarters of the year, as well as five explicit barometers, do offer some insight for data hungry investors and traders.

What to Watch

Seasoned investors, institutions, governments, and newcomers to share trading are making note of five specific areas of performance that have potential to predict how stocks might end up for the year. By far, COVID-related news will dominate the thinking process of institutions who control vast amounts of assets. If schools and offices continue to open up and follow a business-as-usual schedule, stock prices could enjoy a bump in value.

What makes this predictive tool so ambiguous is that many companies are imposing rules that workers must receive one of the vaccines if they want to return to work. Likewise for some students, participants in organized sports, and those who use public buildings. The combination of how and whether the low-level variant of COVID continues to spread, how many otherwise healthy people die from it, and how governments and institutions respond to the pandemic can have a deep impact on the world economy.

Other Factors

In addition to COVID news, investing enthusiasts should pay attention to political news. The Chinese Communist Party's recent banning of cryptocurrency as well as the nation's growing real estate meltdown could start a tidal wave of bad financial effects on a global scale. After the pandemic and politics, three other factors play into the securities fortunes for the final quarter of 2021, namely the upcoming earnings season, general economic factors, and volatility.

Earnings

The fourth quarter of each year is the time when the majority of large corporations issue their earnings reports. The announcements explain not only what happened during the first part of the year but make predictions about near-term growth. Traders follow the media coverage of earnings reports carefully, looking for any clues that the world's biggest companies might be in trouble. As Q4's round of press conferences rev up during October and November, it's usually possible to get a feel for how the year's overall securities markets will fare for the remaining days of the year.

Economic Indicators

Consumer confidence, inflation, unemployment, economic growth, and several other numerical indicators often help interested parties' piece together an overall diagnosis for the last quarter of a given year and the one ahead. Currently, all the numbers appear rather bleak, with slow growth, low employment, and rising inflation plaguing most of the largest national economies.

Volatility

For some, the most valuable indicator of the equities markets is volatility, which continues to be inconclusive as Q4 advances. It's possible that after the first round of earnings announcements, the VIX (a measure of core volatility in the markets) will either rise of fall by a significant margin. Watching all the pertinent indicators is the only way 2021 investing and trading companies and individuals will be able to make any sense of the general direction of stocks.