Headwinds vs Tailwinds

These are two common terms used in business/finance. However, they can also be applied to individual stocks.

Tailwind is a positive factor that either helps the growth of an economy/country. A tailwind for Nigeria for instance would be an increase in crude oil prices. That means more revenue for the country and an increase in dollar income. That leads to less pressure on the exchange rate.

A headwind is the opposite of a tailwind. It means a negative factor that could affect either the growth of an economy or country. An FX devaluation for instance is a headwind for many companies, as it will lead to higher costs.

The two terms have their origin from sailing. A headwind is a wind blowing in the opposite direction of a ship. That will slow it down.

A tailwind is a wind that blows in the same direction the ship moves. That is positive for it. It will enable the ship to move faster

So why are these terms key? In the world in which we live in today, there will be both headwinds and tailwinds. Rather than wait for the full effects to play out, one can position.