I would say the opposite, that the market is in fact largely rational, is a reasonably efficient discounting mechanism, and is constantly factoring in new information in order to estimate the current value of future company cash flows. Thus as new information such as inflation data is released, the market is going to quickly analyze that and adjust prices accordingly. Hot inflation data may mean higher interest rates for longer, which may mean higher cost of capital, and also might mean that bonds are a good deal in relation to equities, etcetera and so forth. In minutes to hours, this is all priced in to the market.Because investors are irrational, especially the big institutional investors who drive the market.
So again I might respectfully disagree and say the market goes down after bad news because the market is rational.
Statistics: Posted by Charles Joseph — Sat Mar 16, 2024 7:38 pm — Replies 33 — Views 2577