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Sound Advice: January 8, 2025

Several factors influence this demand:

  1. Company Performance: Strong earnings, profit growth, and positive financial outlook can increase investor interest.  I agree with this.  Over the long term, companies with rising earnings will see their shares rise.  The single most important driving force is company profitability.
  1. Market Sentiment: Overall investor confidence in a company, industry or the broader economy can drive stock prices higher. A better label for this is investor psychology, which is the primary influence in the short term.
  1. Economic Factors: Favorable macroeconomic conditions, such as low interest rates, low inflation, and strong GDP growth, can boost stock prices. This explanation relates to the market generally, not to individual stocks.
  1. Technical Factors: Short-term trends and momentum can attract more buyers, further pushing prices up. Absolute nonsense.  This is up there with the greater fool theory.  One variant of technical analysis is the point-and-figure approach, which bears a striking resemblance to the packaging of Whitman’s Chocolates many years ago.  The goodies contained in those boxes were far more tasty than the silliness of those who preach this voodoo.
  1. Industry Trends: Positive developments in a company's sector can lift related stocks.  Incorrect.  Those developments must specifically impact the individual companies.  Though many may benefit, not all will.
  1. Investor Demographics: A higher proportion of middle-aged investors tends to increase demand for equities. This runs neck and neck with 2+2=4.
  1. Limited Supply: When there's high demand but limited shares available for trading, especially at the daily market open, prices can spike.  And vice-versa.

Over the long term, a company's fundamental value and earnings growth primarily determine its stock price, as the market acts as a "weighing machine" rather than a short-term "voting machine".

N. Russell Wayne

Weston, CT  06883

 203-895-8877

www.soundasset.blogspot.com

  

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