Resources/Weekly Insights

Volume 14, Edition 34 | November 3 - November 9, 2025

Remembering What Drives Stock Prices

Doug Walters, CFA

Headlines describe chaos, yet markets climb. Why? Stock prices aren’t about today’s news—they’re about tomorrow’s earnings. In our latest Insights article, we explain why markets look forward, how AI is shaping expectations, and how they sometimes overshoot.

Contributed by Doug Walters, David Lemire, Max Berkovich, Matthew Johnson

A client recently asked, “How can stocks keep going up with all the craziness going on?” Of course, stocks actually dipped a bit last week, but the question is still a good one. We’re in the middle of the longest government shutdown, geopolitical tensions are high, and economic uncertainty is rampant. Yet the U.S. stock market is up over 15% year-to-date. How?

The answer lies in understanding what you actually own when you buy a stock. You’re not buying today’s news cycle—you’re buying a claim on a company’s future earnings. Stock prices reflect more about the expectations of those future earnings than the latest headline.

The disconnect between news and markets

Markets are forward-looking. Investors constantly assess what corporate profits might look like months or even years from now. A government shutdown may dominate the news today, but if investors believe it won’t significantly impact long-term earnings, stock prices may barely flinch. This disconnect can feel counterintuitive. Investment commentators do not help as they talk about the market climbing “the wall of worry.” I admit, I’ve used the saying, but I’ve never cared for it. It’s a bit a silly and simply reflects the fact that, 1) there is almost always worry out there and, 2) stocks generally go up.

AI and future expectations

One reason optimism persists today is the potential impact of artificial intelligence (AI). Many investors believe AI could transform productivity, reduce costs, and open new revenue streams across industries. Those expectations are being priced into markets now—even though the full benefits may take years to materialize.

Markets don’t always get it right. They can overshoot—both on the upside and the downside. Think back to the dot-com bubble: investors were correct that the internet would change business forever, but not every profitless company with “.com” in its name was destined for greatness. The broader economy ultimately benefited, but the eventual winners were different than early predictions. AI may follow a similar path—transformational overall, but today’s mega-cap leaders may not be tomorrow’s ultimate beneficiaries.

The takeaway

As stock owners, we’re investing in the future, not reacting to every twist in today’s news. That perspective is critical for staying disciplined. Markets will always face uncertainty, and sometimes prices fall significantly, but history shows that businesses have a knack for adapting, innovating, and growing over time.

So, the next time you see a headline that makes you wonder, “How can stocks keep going up?” remember: prices reflect expectations about tomorrow—not the noise of today.

-20%

Decline in Bitcoin from its peak to its low last week

A 20% decline in equities would be a “bear market” yet the equivalent decline recently experienced by the bellwether cryptocurrency barely made headlines.

Headline of the Week

No end in sight

The U.S. government shutdown is now the longest in American history. With no resolution in sight, the political standoff over healthcare subsidies and budget priorities has paralyzed federal operations, leaving over 1.4 million federal employees furloughed or working without pay. The Federal Aviation Administration has ordered a phased 10% reduction in flights at 40 major airports, citing safety concerns due to a growing shortage of unpaid air traffic controllers. Airlines are scrambling to adjust schedules, and passengers face mounting delays and cancellations as the holiday travel season looms.

The FAA’s unprecedented move underscores the broader economic and operational strain caused by the shutdown, which has halted food assistance programs, frozen federal data reporting, and disrupted services from national parks to student loans. The suspension of food assistance not only threatens food security for 1-in-8 Americans, but also disrupts demand for agricultural products—hurting farmers who rely on consistent domestic consumption. With negotiations stalled and pressure already mounting from all sides, the shutdown’s expanding fallout is testing the resilience of federal systems and the patience of the public.

The Week Ahead

The government is still shutdown leaving us with none of the data we have grown accustomed to anticipating. If we return to our regular programing then inflation reports will be the big headline grabber, with the Consumer Price and Producer Price Indexes slated for late in the week. Without the critical inflation numbers, the economic focus will swing to the United Kingdom unless some unexpected event interferes.

Big if?

If congress ends the shutdown and we get inflation reports…

Consensus expectations from economists are that inflation will tick down month over month on the consumer side but go the other way on the producer side.
These expectations may carry even less confidence than usual without government data in the mix.

Stuck in the middle

This week, like the previous, is missing the heft of the big tech names on the earnings calendar.

The bigger names to watch are Disney and Cisco Systems, but CoreWeave will get most of the attention.
CoreWeave is a cloud computing company that provides infrastructure for artificial intelligence (AI), machine learning, and graphics rendering.
Nvidia is scheduled to release earnings the following week, so CoreWeave will carry this week’s AI flag.

Pound for pound

With U.S. economic data mostly on pause, the U.K. takes center stage as a widely anticipated government budget is due in two weeks and a rate decision in December from the Bank of England.

Stagnant economic Growth in the U.K. over the recent months hint that the 3rd Quarter Gross Domestic Product will be weak.
Expectations are for a 1% expansion on a year-over-year basis.
Slow growth, expectations for tax increases in the budget, and expectations for more rate cuts, including one in December, are impacting the currency.
The Pound has not been this weak against the dollar since 2023 at an exchange rate around £1.31 to a U.S. Dollar.

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