The Long Term Investor What Actually Drives Stock Prices? Sam Ro on Earnings, Valuations, and Market Noise (EP.249)
Mar 25, 2026
Sam Ro, financial journalist and author of TKR, breaks down how earnings and business fundamentals really move markets. He covers valuation limits, why U.S. stocks have led, and when international markets might catch up. Short, clear takes on separating hard data, soft data, and media noise to keep long-term investing focused.
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Earnings Are The True Gravity For Stocks
- Earnings are the primary long-term driver of stock prices.
- Market moves from geopolitical events typically reflect changing risk premiums, not immediate earnings revisions, so prices often recover if earnings prospects hold.
Ask How Events Affect Earnings Before Reacting
- Ask how a headline or geopolitical event will affect corporate earnings before changing portfolio positioning.
- For most events (e.g., Iran tensions), direct US corporate exposure is limited and energy impacts are smaller than in prior decades.
Profit Margin Expansion Explains Elevated Valuations
- Rising profit margins have supported higher valuations by increasing companies' returns on equity.
- Structural margin expansion over decades helps explain elevated P/E ratios and stronger-than-expected market returns since 2015.