Price action or fundamentals? Which moves first?
“I remain convinced that prices move first, and the fundamentals follow.”
— Victor Sperandeo
Prices move before fundamentals. The stock market anticipates economic reality by 3 to 6 months: the index reacts before GDP, manufacturing output or building permits register the change. In February 2020, markets were falling before any lockdown, purely on the anticipation of its effects.
Paradoxical? And yet…
People often say the market always anticipates economic reality by 3 to 6 months. And it’s true.
Factually: study the S&P 500 and compare it to the real indicators of the US economy — GDP, manufacturing output, building permits. You’ll see a clear correlation, and you’ll see that the index moves before economic reality.
That’s why the market saying exists: “Buy the rumour, sell the news.”
The COVID example
No need to look far. Take COVID-19 in February 2020.
We weren’t in lockdown yet, everything was open — and yet the market was already starting to fall, then plunged from the first announcements. Why? Because for every trader, the logic was immediate:
lockdown → economy stops → fewer sales → lower profits → companies worth less → sell.
In a crisis, everyone tends to throw the baby out with the bathwater. So technology stocks initially fell as much as airlines. Then the markets settled, and thought it through: if everyone is stuck indoors, what still runs — or even booms?
Google, Zoom, Netflix, biotech… straight back up like a rocket. Planes grounded and borders closed? Those stayed at the bottom.
And what about the fundamentals?
All the finance graduates recalculated the future profitability of Air France and concluded the current price was a genuine opportunity. They went to see their traders, who replied:
“Get out of my office!! Everyone is selling Air France to buy Zoom, I’m not going to buy Air France!!”
Either you wait for results to be published months later, or you forget the fundamentals and focus on what counts right now: the price of the stock, the chart.
Price action doesn’t lie. It already incorporates everything analysts know — and often what they don’t know yet.