Is The Stock Market A Barometer Of The Nation's Economic Health

[DemocratSinceBirth]

All I can say is I am happy I am not heavily invested. This way I can go broke slowly. This economy sucks.

[T Wolf]

1. In reality - NO. In the myth that we are all fed by the corporate media, the DOW is the

ONLY economic indicator that matters. But then, they are the ones who own most of the wealth and that is where they play with it.

[BlueJac]

2. The crimes suck!

[LiberalFighter]

3. Everyone in the stock market are speculators.

[Fresh_Start]

5. not the least bit true

or at least they didn't intend to be

pensions and 401K aren't intended to be speculative

[Fresh_Start]

4. obviously not

at least if you look at 2007 peak prices clearly hid a rotten core

[BeyondGeography]

6. It's a discredited barometer

At least until someone can explain why the Dow was over 14,000 in the fall of 2007, when it was already clear that a foreclosure crisis was inevitable starting in 2008 once all those subprime ARM's were to be re-priced.

[MadBadger]

7. We have been saying we are in a recession for awhile now, even when the Dow was at like 12,000

So no, The Stock Market is definitely not a barometer.

[Occam Bandage]

8. Yes, but only one of many, and not an especially useful one.

It's something like rough opinion among moderately informed persons as to the likely future profitability of various companies, with many other bits of political and economic data and news used to make that judgment.

[DemocratSinceBirth]

9. This Is A Recent Phenomenon With The Advent Of Cable TV

With the latest stock market numbers in the lower right hand corner.

[Kurt_and_Hunter]

10. An indicator, yes.

A roaring stock market doesn't prove economic health but there are no big bear markets that fell during what were otherwise good times.

So more reliable as an indicator of sickness than of health.

[BelgianMadCow]

11. Krugman said no

and I believe him. Other indicators like consumer confidence, unemployment, housing starts, non-farming payrolls he preferred to the DJIA.

:shrug:

[Kurt_and_Hunter]

12. The thing to remember about the stock market is that it mostly measures

expectations of future corporate profits.

So the question reduces to whether corporate profits are a barometer of the economy.

There is usually a correlation, but far from perfect.

For instance, developments that doubled corporate revenues without increasing profits might indicate a booming economy with higher corporate tax rates.

If corporate profits were impacted by higher wages most citizens would describe that as a better economy (accurately or inaccurately, depending on overall inflation) but the market would go down.

[endarkenment]

13. It is a leading indicator, one of several.

Whether it is a good leading indicator is subject to debate.