REmember in the old days when the economy and the stock market were related?
I made $5k today. Been doing close to it for the last 2 weeks. Took out some today. Didn’t want to pay the taxes for last year. More vacations?
RE: REmember in the old days when the economy and the stock market were related?
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The economy is complicated and it moves fast. News breaks and headlines don’t always tell the whole story.
On the one hand, The stock market is a market where stocks, a type of investment that represents ownership in a company are traded. All we can say is, when the overall economy does well, companies do well and those listed on the stock market do well.
On the other hand, we can also say that The stock market is where people make bets on what’s going to happen in the economy. A bet is just that -— a bet. A bet could be wrong or right, so it is simply a measure of prevailing sentiment.
The stock markets are curated lists of companies that represent particular slices of those markets.
On the other hand, The economy is a sum of goods and services, all of the things we produce. Who produces these things that make up the economy? All of us; every wage level, every industry, every profession. Unlike the stock market.
Whether we like it or not, the richest Americans hold the lion’s share of the value in the stock market despite the fact that about half of households own some stock.
That means that the stock market and stock prices can be disproportionately influenced by a much smaller subset of the population and disproportionately influenced by the fortunes and alternative investment options of that smaller slice.
If the markets are disproportionately influenced by that smaller subset then, by definition, something bigger is having disproportionately less influence, as well.
Another way in which the stock market and the economy are not synonymous is that you can have, you know, workers’ wages really stagnating or growing only marginally as compared to the increases that we’ve seen in the stock market.
How long would the average worker have to work to buy one share of Berkshire Hathaway?
> REmember in the old days when the economy and the stock market were related? <
I think bond yields play a big part here. Ten-year treasury notes are paying less than 2%. But let’s say they were paying 8%. In that case, more folks would be buying bonds. And less folks would be in the market to drive stock prices up.
The economy is related to the market.
Stock purchases are predictive.
Stocks rise in price based on thoughts of increased earnings. There is of course uncontrolled euphoria by some but generally the rising market is an predictor of increased earnings and thus an improving economy