The stock market isn't some kind of hive brain superintelligence, it's a bunch of irrational people (and algos) acting irrationally.
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(It doesn't, the stock market is extremely short-termist and tends to react to big changes long after they've already become obvious. In this case the market is likely reacting to recent "good" news about COVID-19 growth, and will be late in reacting to the upcoming recession.)https://twitter.com/cullenroche/status/1247387742599708673 …
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Could this be because stock prices (at the margin) are established by traders and not investors?
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If things are obvious to you that the stock market hasn't reacted to yet, it's a source of free money! So that can't be what you mean.
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The market being irrational, uninformed, and late to react rarely makes it more predictable. If anything it makes it less predictable (if the market reflected a rational and well-informed model of the future, you would only need a better model in order to stay ahead of it).
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Is the market predictable because it’s late to react to obvious big changes?
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Only in v rare cases (when you know a predictable event is so big that the market will have to eventually react to it -- but even then you don't know when). Since the market is irrational, it's nearly impossible to predict *when* or *how much* it will react to predictable events.
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1. The stock market is an inherently long term instrument whose cash flows (and returns) can only be realized across long time horizons. 2. I don't know of a single investor who doesn't think a huge recession is coming.
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I guess it will be a real surprise when the market dips again then. Much like no one could have possibly foreseen COVID-19 becoming a problem until... March. If market movements were informed you would never see big swings. Major events don't become abruptly more or less likely.
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If it's reacting to changes after they have become obvious to you, that means you can easily make money in it. Have you? Why not?
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The stock market is like a brain indeed trying to predict the future but whose mental capability was reduced to fear and greed only.
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