There are basically two ways to valuate Stocks:

The first type of valuation is done through an analysis of the company’s financial position, earnings, and the Market Price to Earnings ratio.. This type of valuation usually determines the long-term prices.
The second type of valuation is dictated by how much a buyer is willing to pay and how much a seller is willing to sell the stock of shares for. Here the demand and supply mechanism rules primarily. The more the people want to buy a particular stock, the higher its price will be and alternately, the more people that want to sell the stock, the lower the price will be. This type of valuation determines the short-term stock market prices.
This type of valuation does not reflect the actual book price of the shares of a company. It is the market that decides this price. The market price is determined by many influencing factors such as the economy, the politics, and the general mood of the country and buyers/sellers. This makes the stock market like a living thing with its own traits, personality, and behaviour.
So basically in the long term, the stock market is driven by economic and financial growth whereas in the short term, the market is driven by the rumours, mood and emotions of the investors.
During economic prosperity or high consumer confidence, the stock market prices go up in bullish trend inflating the share prices to a lot more than the actual prices; and during difficult economic times, political uncertainty, and low consumer confidence, the stock market prices go down into bearish trends.