While earnings and public opinion of a stock drive the relative price of that stock within the market, the demand for that market as a whole presents a stronger influence on the price of a stock.

Increasing an investment’s price by increasing earnings expectations is akin to growing the investments share of the metaphorical pie. If no new capital is entering the market, it is a zero sum game. In order for one company‘s value to increase, another’s must decrease. Getting a fair reading of a company’s value in such a situation would require that one not only analyze the future cash flow of a specific company but its cash flow relative to all the comapnies within that market.

If capital is exiting a market, even if the size of a company’s slice increases within the market, its gains can be annhialated by the contraction. Conversely, a positive inflow means that even underperforming stocks can break-even, winners’ growth is redoubled. It is like gambling with the odds heavily skewed in your favor. Follow the money. You cannot lose.

Consider the Standard and Poor’s 500 index. Now imagine it to be a pie and for simplicity’s sake, divide it into ten equal slices. If the price of the entire pie is $10, each slice represents a dollar in ownership. An increase in demand for ownership of the index increases the price of the pie according to the law of demand. Although the pie has not changed, each slice may now be worth $1.20. This is the effect of an inflow of capital into the market.That is to say, although the underlying security does not change, increased demand for a stake in the market drives up its price.

Thus, if our S&P 500 pie were the only pie—system where investors can place their money—in the world, we could expect it to consistently grow—have a positive inflow of capital. After all, there is little plurality whether aggregate global investment is increasing. However, because there are dozens of large international stock exchanges and thousands of institutions that sell fixed-income assets, investors have no scarcity of places to park their cash, thereby reducing the size of our pie and each slice alike.

Why will capital flow away from the S&P 500? Over the past thirty years, the United States stock market has had more than a few advantages. For decades, foreign investors have viewed our securities as the safest and most prospective in the world. A sizzling tech industry drove the market with Microsoft in the 90s, Apple and Google in the 00s, and rising web 2.0 stars the likes of Netflix and Facebook in the current decade.Most recently, historically low treasury rates and the expansionary fiscal policies of the have driven even more investors into United States stocks.

With net foreign direct investment (investment from abroad less investment abroad) approaching four trillion dollars per year, a total market capitalization in the teens of trillions (compared with under four trillion for the next largest market, the Chinese), price earning ratios in the hundreds for some of the nation’s most important companies, this market has, at best, exhausted its upward potential. Considering the Fed’s fundamentally unsustainble monetary policy— namely, quantitative easing in conjunction with outrageously low interest rates—further accentuates just how fragile the situation with the stock market might be.

Any increase in the rate offered on government bonds may drive investors into the hands of Uncle Sam and out of stocks. Further, as other markets establish themselves, they will inevitably divert capital flows away from the United States altogether. Even among domestic investors and hedge funds (which are easier to track), the fastest growing category of investment is developing markets.