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Because stocks are just the right to a stream of earnings. In a recession companies earn less and the future becomes more uncertain. Because of the way the mat
by CPLX 5y ago
Because stocks are just the right to a stream of earnings. In a recession companies earn less and the future becomes more uncertain.
Because of the way the math works relatively small changes in future earnings and risk can have a large impact on asset sizes.
- TekMol 5y agoBecause stocks are just the right to a stream of earnings Yes. And money is just the right to bid on the stream of things the industy produces. If companies produce less, money should also be worth less. As your money is your share of bidding power on those fewer things. The price of a stock is the ratio of the value of a company and the value of money. And should therefore stay the same if the industy overall produces less stuff.