Why markets react to surprises, not headlines

​

Financial markets do not react to economic data in isolation. Instead, they respond to the difference between actual data and prior expectations.

​

Before a data release, economists and analysts publish forecasts that shape market expectations. If the released data matches expectations, market reactions may be limited. However, when data deviates from forecasts, prices can adjust rapidly as investors reassess economic and policy outlooks.

​

Positive surprises may support risk-taking, while negative surprises can trigger sell-offs. This dynamic explains why markets sometimes react strongly even to seemingly small changes in economic indicators.