Stock Market Confounds Most Investors Most of the Time

  The stock market confounds most investors most of the time, and it
will continue to do so in the future. That is because the markets are
driven by investor psychology and perception of events. When
good news comes out about a stock, sometimes its price rises, and
sometimes its price falls. When the Federal Reserve FOMC (Federal Open Market Committee) cuts interest rates, as it has on over a
dozen occasions in the past few years, sometimes the market rises
and closes up for the day, and sometimes it falls and closes down for
the day. In that respect the market is unpredictable and that confuses
investors, as well as the so-called professionals, although they
may not admit it.
The market is a discounting mechanism and is always looking
ahead, not backward in the rearview mirror. So news, whether
good or bad, will impact the market in the short run. But in the
long run, growth in corporate earnings and dividends, coupled
with a sound economy with low interest rates and low inflation, is
what will drive stock prices higher. Uncertainty caused by domestic
and global political, economic, and social events will alter the
market’s course for days, weeks, or months, depending on the
severity of the problem perceived. And when least expected by the
vast majority of investors and professionals, the market will turn
around and make a new bull run, with deceiving dips along the
way to shake out the weak hands. And market bottoms usually
occur when investor pessimism is at a low point, all the news is
bad, and no one wants to own stocks anymore. Perception is what
drives markets, not reality. Therefore, the market races ahead while
investors are hoarding their cash