All markets are primarily driven by just four determinants: growth, inflation, risk premiums, and discount rates. That is because all investments are exchanges of lump-sum payments today for future payments. What these future cash payments will be is determined by growth and inflation, what risk investors are willing to take in investing in them as compared to having cash in hand is the risk premium, and what they are worth today, which is called their “present value,” is determined by the discount rate.1
