Making sense of stock price movements is a challenge for all investors. Share price fluctuations often seem illogical…they go up when we think they should go down, and they go down when we think they should go up. Here’s why.
Capital markets are forward looking mechanisms, meaning at any given moment, they reflect a certain set of expectations for the future. From GDP, to Federal Reserve monetary policy, to corporate earnings, etc., market participants en masse set expectations for nearly every economic measure. Markets move when actual results deviate from these expectations. If results are better than expected, prices often move higher and vice versa.