5 ms·

While there are some good explanations already mentioned, the bottom line is that stock prices are forward-looking in the sense that investors buy and sell stoc

While there are some good explanations already mentioned, the bottom line is that stock prices are forward-looking in the sense that investors buy and sell stocks not based on what happened yesterday or what is happening today, but rather based on their expectations for the future (6-12 months ahead). So, basically, the market is signaling that on a whole (i.e. weighted average growth of all the companies in the S&P 500) things (i.e. revenue/eps) aren't going to get dramatically worse and potentially going to get increasingly better.

matthewdgreen 6y ago
The stock market is signalling that it believes 6-12 month revenue expectations for the S&P 500 today [14.7% official unemployment, consumer spending trashed, entire sectors facing months of uncertainty] are roughly the same as they were in October 2019 [3.6% official unemployment, consumer spending rising]. This does not seem a logical conclusion, and so people (in this thread) are asking whether the market is functioning correctly.
- JoshuaDavid 6y ago
  Where are you getting the "6-12 month" number for how the revenue expectation ties to stock price?
  - matthewdgreen 6y ago
    My comment was just a response to the theory in the parent comment.