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The Stock Market Is Both a Voting and Weighing Machine

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What economist Ben Graham’s dictum can tell us about stock market behavior after the latest presidential election. Day 1 of my investment studies delivered a seminal lesson. As Ben Graham wrote: “In the short run, the stock market is a voting machine. But in the long run, it is a weighing machine.” Ben Graham, Economist Initially, I did not fully appreciate that maxim, but over the years, I have realized its insight. Graham’s first point is the difficulty of anticipating the opinion of the voting machine. Political forecasts are largely accurate because pollsters collect data. No such mechanism exists for the stock market—and if it did, its findings would be unreliable, because for equities, the sentiment clock constantly resets. Investment beliefs fluctuate far more readily than do political preferences. This inconstancy leads to stock market behavior that is difficult to explain, even with the benefit of hindsight. Consider the performance of US equities following the election of Don

What economist Ben Graham’s dictum can tell us about stock market behavior after the latest presidential election. Day 1 of my investment studies delivered a seminal lesson. As Ben Graham wrote: “In the short run, the stock market is a voting machine. But in the long run, it is a weighing machine.” Ben Graham, Economist Initially, I did not fully appreciate that maxim, but over the years, I have realized its insight. Graham’s first point is the difficulty of anticipating the opinion of the voting machine. Political forecasts are largely accurate because pollsters collect data. No such mechanis

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