How Much Does the Stock Market Really Reflect the Economy

As it turns out, people who actually do have stocks to any great degree(ignoring those who are pressured into the company that they are working in to holding onto stock options), is rather miniscule. Of course, you have to have money to invest in the stock market and people would rather save their money, explore other options than explore the topsy turvy land that is Wall Street.

The Stock Market is not completely useless when determining what is going on in the economy, but its greatest use would be to misdirect people away from bad news in other areas.

Stock Gains: Here Today, Gone Tomorrow, But Many Problems Still Remain.

If you really look at the stock market, it is a fascinating case study. A fraction of the country can get the majority to panic or be jubilant about how well they invest in the market. However those investing are being worked as well to an extent, as they keep pulling out stocks, investing, buying, and selling based on the slightest bit of data from the economy. With that fact in mind, the stock market does reflect the economy or rather the reactions of investors to the economy. And stocks have been devalued to an extent this year, even if the markets have been up.

It goes back to the concept we have discussed previously. The quick fix. The thing that rules the instant gratification society that we live in. People are far more inclined to not think of what might happen five, ten years down the line, but rather they want to know what is going to happen now and what those who can make the decisions are going to do.

And this lack of foresight has lead to the economy being in the state it is. The Stock Market bottom fell out in late 2008, but so did everything else. People were out of work, laid off, and it was just a miserable wreck. Jobs existed, but the competition for many fields were tougher due to both experienced hands who were out of work and recent college graduates entering the field to compete.

And its election year, so there will be much speculation that there will be an agenda on someone's behalf to maintain the illusion that the economy is on the road to recovery, even if the recession is still alive in many instances. Investors and politicians act in similar ways after all, seizing any opportunity, and changing the rules of the game.

So as far as the Stock Market was concerned, the S and P 500 was up past 1400 for the first time since 2008. Before Obama was President, so you can see how something like that might be spun. There is a belief that things are changing for the better because people want to believe that things are going to change for the better. That belief is the only thing that keeps many sane, but obviously when one looks passed the manipulation, the spun data, we are still as broken, or even more so than we were five years ago.

One good day or a number of good days at the Stock Market does not change the headache that is the United States Economy.