Stock market is driven by psychology, not news

Just a short thought, that came to my mind recently. The stock market is very volatile due to the crisis and all the emotions connected with recent problems. The stock market goes up and down (mainly down) and the moves are quite sharp.

But still, every day when Dow Jones goes in a specific direction, expert say that “today stock market falls because…” or “stock market goes up because…”. The truth is, it doesn’t go because something happened. The market doesn’t fall 4% because “investors started to worry” about a specific industry “perspectives” or “are expecting the monetary policy to tighten” etc.

No. The market is mainly driven by emotions. Sharp moves are psychological. Only long term trends can be explained fundamentally. So, why do these “experts” say all this stuff? Well, they just have to be “experts”. They need to explain it somehow, so they try. That’s what they taking money for. It doesn’t make sense, but “not-experts” don’t know about it, so who cares? And if an expert says - well, market is rising are falling today because of emotions, or simply without a reason - nobody will take that as truth. They all will say he’s not an expert.

Tags: investor psychology, Stock Market