HOLA
Active member
Among the largest forces that affect stock prices are inflation, interest rates, bonds, commodities and currencies. At times the stock market suddenly reverses itself followed typically by published explanations phrased to suggest that the writer's keen observation allowed him to predict the market turn. Such circumstances leave investors somewhat awed and amazed at the infinite amount of continuing factual input and infallible interpretation needed to avoid going against the market. While there are continuing sources of input that one needs in order to invest successfully in the stock market, they are finite. If you contact me at my web site, I'll be glad to share some with you. What is more important though is to have a robust model for interpreting any new information that comes along. The model should take into account human nature, as well as, major market forces. The following is a personal working cyclical model that is neither perfect nor comprehensive. It is simply a lens through which sector rotation, industry behavior and changing market sentiment can be viewed.
As always, any understanding of markets begins with the familiar human traits of greed and fear along with perceptions of supply, demand, risk and value. The emphasis is on perceptions where group and individual perceptions usually differ. Investors can be depended upon to seek the largest return for the least amount of risk. Markets, representing group behavior, can be depended upon to over react to almost any new information. The subsequent price rebound or relaxation makes it appear that initial responses are much to do about nothing. But no, group perceptions simply oscillate between extremes and prices follow. It is clear that the general market, as reflected in the major averages, impacts more than half of a stock's price, while earnings account for most of the rest.
As always, any understanding of markets begins with the familiar human traits of greed and fear along with perceptions of supply, demand, risk and value. The emphasis is on perceptions where group and individual perceptions usually differ. Investors can be depended upon to seek the largest return for the least amount of risk. Markets, representing group behavior, can be depended upon to over react to almost any new information. The subsequent price rebound or relaxation makes it appear that initial responses are much to do about nothing. But no, group perceptions simply oscillate between extremes and prices follow. It is clear that the general market, as reflected in the major averages, impacts more than half of a stock's price, while earnings account for most of the rest.
