Thread: Why do people equate the stock market to our economy?

The stock market always reverts eventually to the fundamentals - how much you want to pay for growth and income is the question.

Originally Posted by Birchtree

The stock market always reverts eventually to the fundamentals - how much you want to pay for growth and income is the question.

Fundamentals?

Barely beating LOWERED expectations (less than 2/3rds of the reports beat)

Stock buy backs (taking stock off the market, causing the remaining stock price to go up)

Insider selling when the stocks are at 52 week highs

Slow M&A

Slow IPO

Loads of unspent business cash on the sidelines (been that way for years)

Fundamentals, hogwash...

Get some BK and have it your way.

Originally Posted by Birchtree

Get some BK and have it your way.

BT, my point was that fundamentals DO NOT validate the 25% gain in the markets since December... they just don't

Originally Posted by RealMoneyIssues

I premise that the stock market is not a reflection of our economy, yet still might react to the economy.

A rising stock market is not indicative of a good or improving economy.

Thoughts?

True. They are not the same thing. And, economists can be bad investors because of that.

Economic numbers are a view to the past, and economic outlooks and forecasts are frequently wrong. Investors digest economic news, apply it to their assessment of the future and make their moves accordingly. The market usually starts tumbling ahead of a recession, or right as we enter it, then bottoms during the recession and starts rallying while the recession is starting to phase into recovery.

It seems that many times investors are better forecasters than economists

Originally Posted by RealMoneyIssues

I premise that the stock market is not a reflection of our economy, yet still might react to the economy.

A rising stock market is not indicative of a good or improving economy.

Thoughts?

I have been thinking about this lately as well. Clearly the economy is sluggish while the stock markert is not. Good points were made about the market being a leading indicators so perhaps the future fundementals are what we are seeing in the charts now.

Of course the market could be a victim of momentum and irrational exhuberance, and eventually we'll pay the price. But this is why trend traders and buy and holders are having their day in the sun. The economy doesn't matter to them, only price action.

This is a great subject and I would have more to say, but I have to run. My laptop is abut to die on me.

How do you spell $85,000,000,000 a Month?
baloney.jpg

Originally Posted by nnuut

How do you spell $85,000,000,000 a Month?
baloney.jpg

This is really the point I forgot to hit on. Its a major theme for me and its what my signiture is about. Todd Harrison, who runs Minyanville, refers to the US economic system as "formerly known as capitalism" because with QE and abnormally low Federal Funds Rates for 5 years now the chips were not allowed to fall where they may when major flaws in our economy came to the forefront.

Time will tell what avenue was the correct one. Bernanke is a hero to some and a devil to others for having such a huge affect on the economy. One thing I certainly believe is that without his actions the banking industry (what would've survived) would be doing things differently now, and perhaps all industry would. Who knows.

I think the actions of the Fed have caused the enormous gap between a market at all time highs and a very weak recovery with employment at very sad levels. I do think that Bernanke is trying his best, however, and maybe that's the best anybody could do. I don't want to find out.