What moves the Stock Market?
With the Corona Virus raging throughout the world in early April 2020, the stocks are having a rally as if it is a bull market and people are often asking: “Why are the stocks up when people are dying, and unemployment is skyrocketing?”
To help answer this question, we need to understand the herding behavior of the financial markets. Here is valuable insight to the behavior of financial markets from Robert Prechter:
Slides of the above presentation: https://www.socionomics.net/wave/14IFTA
Social Mood Moves the Markets
Social mood dictates where the stock market and the economy heads. When the social mood changes, it first gets recorded in the stock market because it is easy for investors to express their opinion in the market. After that, the mood reflects itself on the economy, in the form of layoffs, hiring, consumers shopping, or borrowing, or paying off debt. Here is Bob Prechter explaining a socionomic view of the markets.
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Robert Prechter’s Minyanville Interview about Socionomics and Markets:
News and Events Do not Move the Stocks
Mainstream media would like you to believe that the news are driving the markets. They always find a reason to explain why stocks go down or go up. The truth is everyday there are good news and bad news and the media picks the headline to explain the stock market action that has already happened. Sometimes the headline changes upside down during the same day, but it is the social mood that ultimately decides how these news are interpreted. According to socionomic theory, news is the result of prevailing social mood. Thus, good news tend to appear at market tops, and bad news appear at market bottoms.
Earnings Do not Drive the Stocks
Similar to news, earnings are a lagging indicator. As social mood improves, people first act in the stock market, drive prices up. After the market moves, effects of positive mood is seen in the rest of the economy. This is why during a recession, the stock market rallies first and the recession is declared over as the rest of the economy improves. Similarly, a bull market tops with good earnings and earnings decline as the stock market declines. Worst earnings appear at market bottoms.
Aggregate social mood drives world history like the seasons on this planet. We, as a society are part of the nature and our behavior, suprisingly has a fractal pattern. To understand the impact of
Access his 50-page report “Popular Culture and the Stock Market” FREE.