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Originally posted by on-ramp
stock prices are formulated only by the selling or buying of shares.
stock price is not a function of how a company is doing, their fundamentals, how the economy is doing, etc..
it's all about perception. if Greenspan scratches himself on Tues and says something negative, why do prices go down? did the economy or the fundamentals of a company change from Monday to Tuesday? i dont think so.
how about when CNBC reports "a 1/2 point percentage hike is priced into the market". what does this mean? or , "the market has over-extended technically and is due for a correction". or "there is speculation that there's a recession on the horizon, therefore weak day".
traders buy and sell shares based on speculation, fear, and outlook, causing upward or downward trends. you want to call this "investing", then fine.
after 9/11 , stock prices tumbled, why? because Wall ST. traders perceived a disaster so they got out. if noone sold, prices wouldn't fall.
traders buying and selling shares based on news stories, inside info, technicals, or speculation is casino-like.
there are only a handful of hedge fund managers that greatly influence upward or downward trends. the rest of the population that "invests" are just along for the ride. IMHO
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I'm afraid you are correct. In this day and age, the media controls perceptions. Greenspan continues to have enormous power in the market, and has cost investors billions with his casual sound bites heard round the world. Why this guy has such impact, I don't know. Stock price is all about supply and demand, and investor outlook. And outlook is colored by the media, which likes to deal in gloom and doom.
Inflation has nothing to do with interest rates nowadays--it's all about energy and made in China. And yet every time gas goes up in price, they want to raise interest rates--which is like throwing the gas on a fire. An economy killer.