I'm narrowing this question on Reddit's r/investing to North America. But don't hesitate to discuss other Five Eyes (FVEY) – Australia, Canada, New Zealand, UK, US. I'm posting here because I prefer self-contained answers. I hate scrolling reddit's long-winded dialogue!
It's common to postulate that
stock market indices are semi-strong efficient, so that "all available information about a company has already been priced in".
in the long term, indices such as the S&P500 and NASDAQ100 are expected to grow, so that investing in them will usually profit you in the long term.
How are these two postulates compatible? Doesn't semi-strong Efficient Market Hypothesis mean that the market semi-strong-efficiently values X's share price, so that on average, X's share price remains steady?
News may arrive in the future and affect this semi-strong-efficient stock price, but shouldn't such news average out to 0? Because there's no reason to expect more negative news that positive news, or vice versa? If there was, such news should have already been priced into X's current share price.
As an example, let's postulate that the market behaves semi-strong-efficiently and values X's stock at 100 tomorrow. This means X's stock today should also be Net Present Value of 100, correct? If not, then X's stock is undervalued today, and thus not semi-strong-efficiently valued by the market.
Similarly, if X's share price is expected to value 1000 next month, this 1000 should also be reflected into today's share price, so that today's share price is the Net Present Value of 1000.
This comment mentions "discount rate (risk free rate plus the equity risk premium", but Discount Rate is already incorporated into Net Present Value. Correct?