Many people feared that the entire global financial system was on the verge of collapse in 2008 as a historic financial crisis was underway.

Recently, a high-ranking individual with one of the biggest financial firms in the U.S. says corporate earnings in 2023 could be on par with what occurred back then (Markets Insider, Dec. 19):

The worst earnings recession since 2008 could hit stocks [in 2023], [says] Morgan Stanley chief equity strategist

Morgan Stanley's outlook for U.S. corporate earnings may turn out to be correct, however, you may be interested in knowing that history shows that earnings are not the key factor which drive stock prices, even though that's a widespread belief on Wall Street.

In other words, the assumption is that strong earnings mean a rising stock market and weak earnings mean falling stock prices.

Yet, look at this historical snapshot from a classic Elliott Wave Theorist:

[The chart] shows that in 1973-1974, earnings per share for S&P 500 companies soared for six quarters in a row, during which time the S&P suffered its largest decline since 1937-1942. This is not a small departure from the expected relationship; it is a history-making departure. Earnings soared, and stocks had their largest collapse for the entire period from 1938 through 2007, a 70-year span! Moreover, the S&P bottomed in early October 1974, and earnings per share then turned down for twelve straight months, just as the S&P turned up!

It's understandable why many market observers believe that corporate earnings drive stock prices since earnings are the basis of the growth and contraction of companies and dividends.

Yet, Elliott Wave International has researched most, if not all, the supposed exogenous-cause factors and learned that none of them determine the trend of the stock market.

Even so, people continue to look for some trigger that will tell them what the stock market will do next.

For example, consider this headline (Markets Insider, Jan. 4):

A 'volatility event' will plunge the stock market to new lows in the next 6 months, [says founder of financial research firm]

Elliott Wave International does believe that it's going to get even rougher for stocks in 2023, however, as our research suggests, it will likely not be due to a particular event.

The future path of stock prices will be driven by what has always driven stock prices: the repetitive patterns of investor psychology.

Learn what those repetitive patterns suggest is likely next for stocks by following the link below.