Every minute of everyday, market forces affect your finances, whether that is interest rates, oil prices, gross domestic product, supply, demand, weather, Brexit, tariffs, government spending, politics, health and of course pandemics.
Depending upon what happens in the World, many types of investment are both correlated and non-correlated. Some areas track each, others move against each other.
In very simple terms, if there is a risk of economic slow down:
Some stocks and shares will fall, others say utilities and supermarkets will hold firm as people still need power and to eat during a recession.
Property funds will fall
Gold prices may rise if there is a risk of stock market correction or crash
In times of economy uncertainty, people may move to cash or government debt funds (fixed interest gilts and bonds)
When inflation is a risk, index linked gilts, shares and property will rise, fixed interest stocks may fall.
Interest rates equally have an impact. Interest rate falls may mean fixed rate funds will rise, index linked gilts may rise, shares may rise. Likewise, interest rate increases may mean the reverse.
The reality is that by having a balanced portfolio where some parts of your portfolio will be falling whilst others are rising, means that you have ‘balance’, the rises offset the falls meaning you should not suffer huge falls overall when stock markets correct or tumble.
You will always have some movement both down and up but not as severe when compared to if you were purely invested in stock markets when there is a crash.