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Paul Tracy

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Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 2 million monthly readers. While there, Paul authored and edited thousands of financial research briefs, was published on Nasdaq. com, Yahoo Finance, and dozens of other prominent media outlets, and appeared as a guest expert at prominent radio shows and i...

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Updated August 5, 2020

What is Market Sentiment?

Market sentiment is the general feeling about the climate of the market as expressed by the direction of market prices.

How Does Market Sentiment Work?

Market sentiment, as the name suggests, describes the outlook of investors in a market. Market sentiment is most evident in overall price trends. For example, rising prices suggests an optimistic (bullish) market sentiment, and falling prices suggests a poor (bearish) market sentiment.

Why Does Market Sentiment Matter?

The nature of market psychology suggests that any given trend may be more indicative of market sentiment than of fundamental gains or losses in the value of stocks.

As a result, market prices are not necessarily indicative of a stock's fundamental value.

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