What Moves Stock Prices Over The Long-Term

  • Company Fundamentals, for example how much the company generates in cash and earnings across its life, is the main contributor to how its stock performs.
  • Long-term economic trends lay the basis for stocks. If a persistent problem with inflation or low economic growth continues, that can cause problems for a lot of investments.
  • Valuations relate to how much you’re paying for a slice of a company. A stock’s valuation is a estimate of how valuable it is based on how much the company is predicted to earn in profit.
  • Risk is the price you pay for higher returns. If you hold a slice of a risky asset, you should call for a higher return. Academic research highlights how shares of small companies and companies in emerging markets usually generate higher returns since they’re riskier.
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