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so stocks are less related to individual company performance than they should be?
by calvinmorrison 2y ago
so stocks are less related to individual company performance than they should be?
- klipt 2y agoMore that, almost all companies are expected to perform worse when you elect an economically incompetent government.
- don_neufeld 2y agoThere is no “should” A big factor of stock performance is the r market’s assessment of risk and its risk tolerance. Both of those can change, and have nothing to do with company performance.
- ARandumGuy 2y agoStocks have always been influenced by stuff outside of company performance. This is why you should look at other metrics to see how successful a company actually is. Also, companies don't exist in a vacuum. Every US company is impacted by the actions of the federal government. Some companies may be able to come out ahead, but many others will struggle. And predicting which is which is incredibly difficult.
- stego-tech 2y agoStocks in the modern context are little more than speculative instruments - the equivalent of buying a blind bag of chips from a casino and betting they'll increase in value by the time you attempt to redeem them. They rarely correlate to long-term company health anymore, and often correlate to little more than the psychological state of the market at the moment of any given transaction. Remember that prices are a product of trades, not actual valuation, and that those making trades have a vested interest in getting the best possible price by any means necessary - and that since very few people hold a disproportionate amount of total securities, they have outsized influence on those valuations. It's why I've always been wary of this forced participation in the securities markets the US seems to have. It's forcing folks to gamble at a casino for the chance to retire or grow their earnings, using historical models to support arguments in lieu of actual regulations or guarantees of returns (like dividends, bonds, or interest rates on savings).
- YZF 2y agoI don't think this is completely true. Other than some small portion of companies with weird ownership structure (which the market should have punished but doesn't always) stock ownership is ownership of the business. There's probably a broader participation in the market (re: few people) than most of history, both direct and indirect. That can be good and bad. There's definitely a speculative component but it's nothing like a casino.
- relaxing 2y agoFor the volumes your retail investor deals in, the equity rights that come with common stock are negligible to nonexistent. Maybe you get dividends, but you’d get more value from the comped room and buffet at the casino.
- YZF 2y agoBut the investors in aggregate have the rights. If you bought a stock that pays dividend then for sure you get dividends.
- 2y ago
- SonOfKyuss 2y agoWho’s to say how much the stock price “should” be based on individual company performance, but I think the idea is that individual company performance may be affected by uncertainty in the broader economy. You could also see movement out of stocks in general and into safer investments if the stock market is seen as getting more volatile
- s1artibartfast 2y agoStocks values are predictions about the future. Past performance is just one factor among many. There is no "should". You have hundreds of millions of people predicting the future using different models and heuristics. The future is a moving Target which also depends on what people think about it.