The market makes no sense – or does it?

BENJAMIN Graham, Warren Buffett’s mentor and the father of value investing, famously said that in the short run, the market is a voting machine; but in the long run, it is a weighing machine.

A war in the Middle East is still raging; in Ukraine, war remains unresolved. As oil prices spike and inflation rises, there is concern that we may be entering a period of stagflation. Yet global stock markets have just hit another all-time high.

It is tempting to think the market is irrational. But once you understand what is actually driving prices, it makes a great deal of sense. The key is earnings.