Why Prices Move

Five parts of groundwork. One payoff. Here is the unified framework that answers the question this series set out to answer.

We’ve covered why markets price turning points before the data catches up. Part 5 goes one layer deeper: the human forces that amplify those swings far beyond what any rational reading of the economy would justify.

Stock prices almost always move before the economic data catches up. Here’s why — and why trying to trade that pattern is usually a losing game.

Inflation doesn’t just raise prices at the grocery store. For investors, it erodes real returns, drives interest rates higher, and exposes which businesses can protect themselves — and which ones can’t.

When the price of borrowing money changes, the mathematical value of future earnings changes with it — even when those earnings haven’t changed at all. That’s why rising interest rates send stock prices lower, sometimes dramatically, without any deterioration in the underlying businesses.

The stock price you see today is not the same thing as what the business is worth. Understanding that distinction is the foundation of everything that follows in this series.