Why The Stock Market Ain’t On The Level, Part 4

Once upon a time, the function of the stock market was to assess, value and capitalize the earnings and performance of listed companies, and to provide a venue for issuers and investors to transact the raising of new equity capital.

No more. It’s all about purely speculative trading and a mushrooming array of devices like indexed funds, ETFs, robo-traders and Reddit mobs to churn existing equity securities and their derivatives. The driving force is not company earnings, but the policy machinations and liquidity injections of the Federal Reserve and other central banks; and also the anticipation of how other traders will respond and position in response to actual and expected Fed actions and the implications of the incoming economic data for the latter.



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