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Markets in a Minute

Stock Value vs. Price: What’s the Difference?



This infographic is available as a poster.

Stock Value

Stock Value

This infographic is available as a poster.

Stock Value vs. Price: What’s the Difference?

From the Dutch Tulip Mania of the 17th century to the Roaring Twenties, asset bubbles have cropped up in markets persistently.

The recent activity in GameStop and other securities are no exception. But what does this mean for investors today? To answer this question, we return to a key principle of investing: the difference between a stock’s price versus its value.

This Markets in a Minute chart from New York Life Investments shows the key forces that impact both price and value to help investors harness a deeper understanding of their investments.

What Determines a Stock’s Value?

A company (represented by a stock) derives its value from fundamental factors including:


Earnings, or profitability, is often an indicator of company performance. Past and present numbers indicate a company’s profitability thus far, while future earning projections help investors gauge potential performance going forward. This is germane to investors because a company will typically reinvest its earnings into the business or distribute them as dividends to investors.

Market Share

Companies with strong market share possess economic moats, which create a barrier against competitors. These moats can protect a company from new market entrants or allow for cost advantages, increasing the company’s value to investors.

P/E ratio and Other Metrics

The price-to-earnings (P/E) ratio is a common metric for valuing companies. It measures a company’s price in relation to its earnings per share (EPS). If a company has a low P/E ratio compared to its peers, this may suggest that it is undervalued.

Here are common metrics used to value a stock:

P/E ratioPrice/Earnings Per ShareCompares a company’s stock price relative to its earnings
P/B ratioPrice/Book Value Per ShareCompares a company’s stock price relative to its tangible net asset value
Debt-to-equity ratioTotal Liabilities/Total Shareholders’ EquityShows company leverage, or the extent that a company is financing operations through debt

Competitors (Current and Potential)

Comparing a company against its peers can indicate its relative strength. An investor may discover value discrepancies between competitors, presenting potential investment opportunities.

What Determines a Stock’s Price?

A stock’s price, on the other hand, is typically influenced by a separate set of factors:

Investor Demand

Supply and demand is central to determining the price of a stock. When an influx of market participants are buying a stock, the market price will rise. If the number of sellers for a stock exceeds the number of buyers, the price may drop.

Broad Market Trends

Bull and bear markets are examples of primary markets, which may influence a stock’s price performance. Rallies or directional turnarounds are other types of shorter market trends which often last between two to eight weeks.

Media and Analyst Reports

When a company faces a controversy, media reports may influence investor behavior, causing them to sell. Conversely, a strong analyst rating may influence investors to buy.

Economic Factors

Across asset classes, six macroeconomic factors have been shown to explain 90% of a stock price’s movements: real rates, economic growth, liquidity, inflation, emerging markets, and credit.

Company News

When a company releases quarterly earnings reports, it may influence investor demand. If Apple’s company’s earnings exceed expectations, for instance, its stock price may consequently rise after the announcement.

In the short term, many of the variables that influence a stock’s price are driven by external forces. But in the long term, fundamental factors such as profit margins or earnings, often play a bigger role.

Forest For the Trees

With the above factors in mind, investors are better equipped to recognize the driving forces that underscore a stock’s price and value, especially in the face of volatility and market exuberance.

By knowing these core differences, investors will not only get a better awareness of their portfolios, but will learn how to make more rational investment decisions.

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Markets in a Minute

Explainer: A Visual Introduction to Fed Tapering

Broadly speaking, Fed tapering is the reversal of quantitative easing. We show the history of Federal Reserve bond tapering and how it works.



Fed Tapering

Explainer: A Visual Introduction to Fed Tapering

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The Federal Reserve began tapering its large-scale asset purchases in November 2021, a move likely influenced by:

  • Rising inflation
  • Improving unemployment
  • Strong U.S. GDP growth

More than $4 trillion in capital was injected into the economy through quantitative easing (QE), over the course of the pandemic, inflation is at 40-year highs, and unemployment levels hover below 4%.

As Fed policy responds to a recovering U.S. economy, this Markets in a Minute chart from New York Life Investments shows how Fed tapering works, and its impact on the economy.

How Fed Tapering Works

Fed tapering is the unwinding of the Federal Reserve’s large-scale asset purchases.

After the 2008 financial crisis, large scale asset purchases were introduced for the first time to inject liquidity into the market and help restore confidence. During the pandemic, they were introduced once more, at a rate of $120 billion per month.

Here’s how it works:

  1. The U.S. central bank buys government bonds typically in the form of Treasuries and mortgage-backed securities (MBS).
  2. This influx of demand leads to a rise in these bond prices and their yields (interest rates) fall.
  3. As this lowers the interest rate on the government bonds, what often follows is lower interest rates on loans for households and businesses.
  4. Lower rates stimulate spending.
  5. When the economy is running well, the bank may unwind asset purchases to help keep inflation low, otherwise known as Fed tapering.
  6. Notably, Fed tapering and QE is hotly debated among economists. Those in favor say QE is a critical tool for stimulating the economy. Those against say that it inflates asset prices and contributes to inequality.

    Inflation Levels

    The consumer price index (CPI) rose 7% in December, the highest rise since 1982.
    Fed Tapering

    Given this increase, Lawrence Summers, former U.S. Treasury Secretary and Jason Furman, former chief economist for President Obama say that the Fed didn’t taper soon enough. Other financial heavyweights suggest this is just the beginning of a hawkish approach to inflation.

    So how does Fed tapering impact inflation?

    By tapering asset purchases, the amount of money circulating in the economy that can be used to borrow to buy a house or car is reduced. According to this theory, when there is less spending, inflation will gradually cool down.

    Fed Tapering and Interest Rates

    The Federal Reserve has outlined that it will taper asset purchases before it increases targets on short-term interest rates. By current estimates, interest rates could rise in March.

    However, if the pandemic takes a turn for the worse, the Federal Reserve can shift direction. This gives the Fed time to assess how the market and economy will react before it raises rates.

    To prevent the taper tantrum of 2013, which led to market volatility and U.S. dollar appreciation, Federal Reserve chair Jerome Powell has stated that the Fed must carefully communicate the sequence of QE and tapering to prevent any fear in the market.

    When Doves Cry

    Like the 1940s, the rise in money growth over the pandemic has been driven by government deficits. By contrast, leading up to the 2008 Global Financial Crisis or during the 1950s and 60s, the private sector spurred loan growth.

    Monetary inflation can impact consumer prices and financial asset inflation.

    As CPI and financial markets have soared over the pandemic, investors will be watching closely to see how Fed tapering impacts future monetary policy.

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Markets in a Minute

Ranked: Real Estate Returns by Property Sector (2012-2021)

From residential to retail, are there patterns in real estate return on investment? We rank them by sector over the last decade to find out.



This infographic is available as a poster.

Real Estate Return on Investment by Sector

For the ninth year in a row, Americans say real estate is the best long-term investment.

However, what might be less clear to the average investor are the different types of investments available within the real estate sector, and how they compare. Real estate return on investment within property sectors has historically been uneven, and 2021 was no exception. While residential property soared, office real estate has performed relatively poorly.

Are there any patterns in the top performers over time?

This Markets in a Minute from New York Life Investments ranks real estate return on investment by sector over the last decade.

Sector Returns Over Time

We used data from the National Association of Real Estate Investment Trusts to show real estate return on investment by year. A real estate investment trust is a company that owns, operates, or finances income-producing real estate.

Here’s how total returns stack up by property sector, sorted from highest to lowest return in 2021.

Self Storage19.9%9.5%31.4%40.7%-8.1%3.7%2.9%13.7%12.9%57.6%

Data for 2021 is as of November 30. Specialty and data center sectors are excluded as this data was only available from 2015 onwards.

Self Storage real estate was the best performing sector for the last two years, and also performed well during the 2015 market correction. It tends to perform well when people’s lives are disrupted, such as when they’re moving for a new job, schooling, or due to marriage or divorce. In the case of COVID-19, self storage got an extra boost from people wanting more space in their home amid remote work.

Timber and Industrial real estate have been in the top three performing sectors for at least half of the last decade. Industrial real estate, a category including properties that enable the production, storage, and distribution of goods, has seen increased demand due to the rise of e-commerce. One estimate says the U.S. could require an extra billion square feet of warehouse space by 2025.

On the other hand, the Lodging/Resort sector has frequently been one of the bottom performers. A form of discretionary spending, hotel stays may be one of the first expenses people cut when the economy is in a downturn. This weakness was compounded by lockdown restrictions during the COVID-19 pandemic.

What is a Good Return on Investment in Real Estate?

In light of the above data, investors may be wondering which sectors are “the best” to invest in.

The short answer: it depends. Here’s how real estate return on investment has varied within sectors, using the minimum, median, and maximum returns. We’ve sorted the data from the highest to lowest standard deviation, a measure of risk.

Real Estate Return on Investment

While Timber and Self Storage have delivered strong returns, they have also been relatively risky, with some of the widest variations in returns.

Industrials have seen the highest median return, and their risk is about middle of the pack. The second highest median return goes to the Mortgage sector, which earns income from the interest on mortgages and mortgage-backed securities. The mortgage sector has seen less risk than most other real estate categories, at least in the last decade.

For investors with a lower risk tolerance, Infrastructure may be a sector to consider. These properties had a positive return on investment for all of the last 10 years, and had the lowest risk of any property sector.

Patterns Within Real Estate Return on Investment

By looking at historical patterns, investors can consider how economic conditions may affect real estate return on investment.

Sectors associated with discretionary spending, such as Retail and Lodging, have tended to perform poorly during downturns. On the other hand, Self Storage and Residential properties have historically been more resilient during the 2015 selloff and the COVID-19 pandemic.

Future trends may also offer food for thought. For example, as the population ages and the government puts an increased focus on critical facilities, could the Healthcare and Infrastructure sectors be poised for growth?

Whichever sector(s) an investor focuses in on, real estate serves as an alternative investment that can help diversify any portfolio.

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