From ValueWalk:
The conventional wisdom is that the market is forward-looking. What investors are trying to figure out is, where are stocks headed? They form an assessment of what they think is going to happen to the economy and that determines what prices they are willing to pay for stocks. As their assessments of future economic developments change, stock prices change with them. The stock price that applies on any particular day reflects the collective assessment of millions of investors placing their bets on where the economy is headed.
This is a plausible explanation of why stock prices change. But there is no hard evidence supporting it. It certainly has never been proven. It is a theory, that's all.
My view is that the evidence all points in a different direction...
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