The media loves to ascribe a reason for every significant stock market move. Humans feel better if there is an answer to ‘why?’ How many times have you read something like, “Stocks fall on worries over trade”, or “Stocks down on concern about inflation”? The reality is, no one really knows why the market moves one way or another from day to day. Stock investors tend to be forward-looking; consequently, prices are not necessarily responding to today’s news. Or, if today’s news is affecting prices, it’s often something completely unrelated to splashy headlines.
We have made the point a number of times that interest rates impact stock prices. Another important factor is earnings from bellwether stocks such as Amazon, Apple, or Boeing. Sometimes this type of news is buried in the back pages of the paper.
So when you hear the nightly business news, ascribing today’s market move to a tweet, spend a little time looking at earnings reports or Fed announcements, and you might find the real reason the market moved.