Everyone tells me the stock market goes up over time but I’m trying to understand why. The price of a stock reflects all of a company’s future expected earnings net present valued back to the present. This includes inflation, improvements in productivity, technological innovation, population growth, etc. Basically all knowable factors about a company are supposed to be baked into the price. So when there’s a better than expected earnings report, the stock price goes up, and when there’s an unexpectedly bad report, the stock price goes down. Why doesn’t the stock market fluctuate up and down with good and bad news but stay relatively stable rather than always trending up? For the stock market to always trend up over the long term, that would imply investors are perpetually being positively surprised by a companies earnings, which doesn’t make sense to me.
Submitted April 16, 2019 at 01:02AM by Fatfire87a http://bit.ly/2PkGyNX
