Is the stock market an accurate indicator of a strong economy?

derrybderryb Posts: 27,428 ✭✭✭✭✭
edited October 26, 2019 4:31PM in Precious Metals

Given the monetary changes brought by the Federal Reserve and government regulators since 2008, does a strong stock market index (i.e. DJIA, SP500) continue to accurately reflect the health and future of the overall economy? Please explain your reasoning.

Anonymous poll.

“We can ignore reality, but we cannot ignore the consequences of ignoring reality.” – Ayn Rand

Is the stock market an accurate indicator of a strong economy? 30 votes

Yes, stock market is strong because the economy is truely strong.
20% 6 votes
No, stock market is strong for reasons other than a strong economy.
80% 24 votes
«1

Comments

  • derrybderryb Posts: 27,428 ✭✭✭✭✭
    edited October 26, 2019 11:05AM

    No.

    Stock market, since 2008 has had trillions of new dollars thrown at it. Leading the list is stock buybacks using cheap dollars. How could it not go up?

    It is no longer an accurate barometer for the overall economy. It does reflect the financial health of the one percenters' economy. Fed intervention into credit markets – including ZIRP and QE – inflated the stock, bond, and real estate holdings of the wealthy. Almost everyone else was left behind.

    Economic numbers have become political tools and as such they are manipulated for political gain.

    It's no secret that perception is important to keeping any ponzi/scam going. Big green numbers on the ticker at the bottom of the TV screen are and always have been necessary to convince the masses that "all is well."

    Government statistics for the health of the economy are provided, well, by the government and usually by the party in power. While the Government cannot directly control the stock market indices, it can, and has provided the stimuli to indirectly control them.

    Oh, and for the misinformed: The stock market IS NOT the economy.

    “We can ignore reality, but we cannot ignore the consequences of ignoring reality.” – Ayn Rand

  • rickoricko Posts: 69,503 ✭✭✭✭✭

    I have long struggled with this question. I consider the stock market to be the biggest gambling casino in the world....Sure, there are good bets, sure bets and bad bets...and knowledgeable people - or those with special 'information' can do better than the average gambler. The points that sets the stock market apart -IMO- are things like black swan events, political moves and geopolitical economic issues. So, not taking the easy way out...but I think both answers are right to a degree. Cheers, RickO

  • cohodkcohodk Posts: 15,840 ✭✭✭✭✭
    edited October 26, 2019 1:46PM

    Just get out and about and travel this country. Then develop an opinion based on your observations. You can decide to visit the depressed inner cities which contribute nothing to the economy, or you can go to just about anywhere in FL, or Atlanta, Charlotte, Sacramento, Seattle, Nashville, Portland, Denver, San Diego, Dallas, San Antonio, Philadelphia and go crane counting. How high can you count?


    Excuses are tools of the ignorant
    Knowledge is the enemy of fear
  • DrBusterDrBuster Posts: 3,930 ✭✭✭✭

    Stock market to me leans way more toward banking/political/Corp combo health first before an economy relation.

  • topstuftopstuf Posts: 13,474 ✭✭✭✭✭

    @cohodk said:
    Just get out and about and travel this country. Then develop an opinion based on your observations. You can decide to visit the depressed inner cities which contribute nothing to the economy, or you can go to just about anywhere in FL, or Atlanta, Charlotte, Sacramento, Seattle, Nashville, Portland, Denver, San Diego, Dallas, San Antonio, Philadelphia and gi crane counting. How high can you count?

    Sacramento is not a good example.
    Highest cheapskate count in the state.

  • PerryHallPerryHall Posts: 37,037 ✭✭✭✭✭

    @topstuf said:

    @cohodk said:
    Just get out and about and travel this country. Then develop an opinion based on your observations. You can decide to visit the depressed inner cities which contribute nothing to the economy, or you can go to just about anywhere in FL, or Atlanta, Charlotte, Sacramento, Seattle, Nashville, Portland, Denver, San Diego, Dallas, San Antonio, Philadelphia and gi crane counting. How high can you count?

    Sacramento is not a good example.
    Highest cheapskate count in the state.

    Is that where you live? ;)

  • cohodkcohodk Posts: 15,840 ✭✭✭✭✭

    @topstuf said:

    @cohodk said:
    Just get out and about and travel this country. Then develop an opinion based on your observations. You can decide to visit the depressed inner cities which contribute nothing to the economy, or you can go to just about anywhere in FL, or Atlanta, Charlotte, Sacramento, Seattle, Nashville, Portland, Denver, San Diego, Dallas, San Antonio, Philadelphia and gi crane counting. How high can you count?

    Sacramento is not a good example.
    Highest cheapskate count in the state.

    Roseville. Folsom, Elk Grove isnt booming?


    Excuses are tools of the ignorant
    Knowledge is the enemy of fear
  • derrybderryb Posts: 27,428 ✭✭✭✭✭

    @cohodk said:

    Roseville. Folsom, Elk Grove isnt booming?

    Stock market is booming. Good economic indicator? Better/worse than Roseville, Folsom, Elk Grove?

    “We can ignore reality, but we cannot ignore the consequences of ignoring reality.” – Ayn Rand

  • derrybderryb Posts: 27,428 ✭✭✭✭✭
    edited October 26, 2019 3:37PM

    More telling of the true strength of the economy is this current general consensus: "Next week the Fed will be forced to cut rates again for the third time this year as they can’t afford to not cut rates for fear of disappointing markets."

    It also confirms the accuracy of my discussion on perception in the original post.

    “We can ignore reality, but we cannot ignore the consequences of ignoring reality.” – Ayn Rand

  • thefinnthefinn Posts: 1,327 ✭✭✭✭✭

    Wait until all of the Baby Boomers start cashing out their 401(k)s and see what the stock market does. There'll be more sellers than buyers, and you know what that does

    thefinn
  • DrBusterDrBuster Posts: 3,930 ✭✭✭✭

    @thefinn said:
    Wait until all of the Baby Boomers start cashing out their 401(k)s and see what the stock market does. There'll be more sellers than buyers, and you know what that does

    I'd hope the fund managers would hedge the sells against themselves on the long funds...but that would make too much sense.

  • dpooledpoole Posts: 5,341 ✭✭✭✭✭

    There is too much capital world-wide that is chasing too little investment opportunity. Inflated stock prices are (partially) the result.

  • BaleyBaley Posts: 21,272 ✭✭✭✭✭
    edited October 26, 2019 7:25PM

    LOL, gawd I love binary questions based on 'facts' not in evidence 😉

    My answer can be expressed in multi factoral vector calculus, or, alternatively, through interpretive dance, but not in thumb pect words when I'm this drunk, lmao

    Liberty: Parent of Science & Industry

  • derrybderryb Posts: 27,428 ✭✭✭✭✭
    edited October 27, 2019 2:12AM

    @Baley said:
    LOL, gawd I love binary questions based on 'facts' not in evidence 😉

    My answer can be expressed in multi factoral vector calculus, or, alternatively, through interpretive dance, but not in thumb pect words when I'm this drunk, lmao

    simple, strait forward question. If you are unable to provide an educated answer, don't be embarrassed to just say so.

    “We can ignore reality, but we cannot ignore the consequences of ignoring reality.” – Ayn Rand

  • MLBdaysMLBdays Posts: 1,135 ✭✭✭✭✭

    Strong stock markets like this one are based on low interest rates....."don't fight the fed".......is right.....cheap money is high velocity and that means asset speculation.... stocks and things like collectibles are right in that wheelhouse (bubbles possible and likely). LOW interest rates........ as long as inflation is in check ...it looks good. Once rates begin to rise? ~run for cover baby.

  • BaleyBaley Posts: 21,272 ✭✭✭✭✭

    Liberty: Parent of Science & Industry

  • cohodkcohodk Posts: 15,840 ✭✭✭✭✭

    @derryb said:
    More telling of the true strength of the economy is this current general consensus: "Next week the Fed will be forced to cut rates again for the third time this year as they can’t afford to not cut rates for fear of disappointing markets."

    It also confirms the accuracy of my discussion on perception in the original post.

    Interest rates are global. The Fed is not cutting rates in the US because the US economy is bad, but rather because rates at our major trading partners are so low.

    I believe the basis of discussion is rooted in your relatively novice understanding of economics, finance, inter-market relationships, demographics and consumer psychology. As the diagram posted by Baley illustrates, a little knowledge can be a dangerous thing.


    Excuses are tools of the ignorant
    Knowledge is the enemy of fear
  • cohodkcohodk Posts: 15,840 ✭✭✭✭✭
    edited October 27, 2019 5:43AM

    @derryb said:

    @cohodk said:

    Roseville. Folsom, Elk Grove isnt booming?

    Stock market is booming. Good economic indicator? Better/worse than Roseville, Folsom, Elk Grove?

    Certainly is representative. Just as is Jacksonville. And you dont think Jax is booming, then your head really is buried deep.


    Excuses are tools of the ignorant
    Knowledge is the enemy of fear
  • bigjpstbigjpst Posts: 2,512 ✭✭✭✭

    I don’t think that the stock market itself is a sign of a strong economy. That doesn’t mean I don’t think we are currently in a strong economy.
    More than half of the country own stocks in some way either through retirement or directly so saying the only people who the market benefits is the 1% is disingenuous.
    The percentage of stock owned by the wealthiest 10% is growing for sure. Is that because they are oppressing and manipulating the poor people or is it because they were smart enough to invest in the market after the crisis instead of climbing into a bunker and buying gold and cans of beans waiting for the apocalypse?

  • derrybderryb Posts: 27,428 ✭✭✭✭✭
    edited October 27, 2019 8:25AM

    @cohodk said:

    Interest rates are global. The Fed is not cutting rates in the US because the US economy is bad, but rather because rates at our major trading partners are so low.

    Everything is global, including this forum. If you really believe the FED cuts rates because they are being cut elsewhere around the globe, you are a perfect example of Baley's chart. If the chart fits, wear it.

    psst: The FED lowers interest rates to stimulate economic growth. A good indicator of a weak/weakening economy.

    next poll:
    Does the FED lower interest rates because Japan does or does the FED lower interest rates to stimulate economic growth in the US? lol

    “We can ignore reality, but we cannot ignore the consequences of ignoring reality.” – Ayn Rand

  • cohodkcohodk Posts: 15,840 ✭✭✭✭✭
    edited October 27, 2019 8:57AM


    Keep driving that bus derryb. Full speed ahead. I know, your struggle is real. Haha


    Excuses are tools of the ignorant
    Knowledge is the enemy of fear
  • jmski52jmski52 Posts: 19,828 ✭✭✭✭✭

    My answer can be expressed in multi factoral vector calculus, or, alternatively, through interpretive dance, but not in thumb pect words when I'm this drunk, lmao

    Baley, please post a video of your interpretive dance answer. This is a must see for me. :)

    Q: Are You Printing Money? Bernanke: Not Literally

    I knew it would happen.
  • rickoricko Posts: 69,503 ✭✭✭✭✭

    Re-visiting this thread, and reading the subsequent contributions, I still believe both answers are applicable....Which is more correct? I have no idea....Cheers, RickO

  • TwoSides2aCoinTwoSides2aCoin Posts: 40,833 ✭✭✭✭✭

    The stock market is a list of businesses. There are millions of companies ( mine included) unlisted. So , I have to say "no". But we need a measuring stick.

  • TwoSides2aCoinTwoSides2aCoin Posts: 40,833 ✭✭✭✭✭

    And though I enjoy the gif (cohodk) , I appreciate the question/ poll/survey....and provocative views.

  • MsMorrisineMsMorrisine Posts: 23,353 ✭✭✭✭✭

    @TwoSides2aCoin said:
    And though I enjoy the gif (cohodk) , I appreciate the question/ poll/survey....and provocative views.

    check your PMs

    Current maintainer of Stone's Master List of Favorite Websites // My BST transactions
  • djmdjm Posts: 994 ✭✭✭

    @thefinn said:
    Wait until all of the Baby Boomers start cashing out their 401(k)s and see what the stock market does. There'll be more sellers than buyers, and you know what that does

    Most will never be cashed in expect for the RMDs. They are taxed too heavily.

  • OPAOPA Posts: 15,775 ✭✭✭✭✭
    edited October 29, 2019 6:08AM

    Historically speaking, the stock market for the most part, (more accurate than 90% of the talking heads or self made economic forum forecasters) has been a good barometer of what's going to happen approx 6 month down the road. We shall see if that still holds true.

    (forgot to add month to 6)

    "Bongo drive 1984 Lincoln that looks like old coin dug from ground."
  • MsMorrisineMsMorrisine Posts: 23,353 ✭✭✭✭✭
    edited October 29, 2019 6:49AM

    what about the bond market? I think the bond market is better than the stock market. (that yield curve inversion is long gone now, btw)

    Current maintainer of Stone's Master List of Favorite Websites // My BST transactions
  • topstuftopstuf Posts: 13,474 ✭✭✭✭✭

    @cohodk said:

    @topstuf said:

    @cohodk said:
    Just get out and about and travel this country. Then develop an opinion based on your observations. You can decide to visit the depressed inner cities which contribute nothing to the economy, or you can go to just about anywhere in FL, or Atlanta, Charlotte, Sacramento, Seattle, Nashville, Portland, Denver, San Diego, Dallas, San Antonio, Philadelphia and gi crane counting. How high can you count?

    Sacramento is not a good example.
    Highest cheapskate count in the state.

    Roseville. Folsom, Elk Grove isnt booming?

    HUGE influx of SF Bay Area incomers.
    Also the rest of Sacramento is really deteriorating. Nice areas of the past are almost ghettos.
    Not much supervision of planning dept.

    WAY oversaturated commercially.

    However, the government employees keep ...some... things going. Even though they aren't known as "spenders" they migrate to the outskirts as soon as they can.

  • WCCWCC Posts: 415 ✭✭✭

    @dpoole said:
    There is too much capital world-wide that is chasing too little investment opportunity. Inflated stock prices are (partially) the result.

    Not capital, it's debt but I know what you mean.

  • s4nys4ny Posts: 1,480 ✭✭✭

    Not a yes or no. So many factors determine relationship between stock market and economy. Stocks are at all time highs today because of limited alternatives for investment, primarily due to historic low worldwide interest rates. Rates are low because of limited investment alternatives. After a 10 year+ bull market, it is not likely to end well. But, I am loaded with stocks because I have no better investment alternatives.

    One divergence is the large number of companies that are not making any money. UBER, LYFT, PTON, SDC, are good examples of 2019 IPOs that do not make money and may never make money.

    The hottest stock of the 1920s was RCA. Think of that company, records and phonographs, radios and radio stations. Vacuum tubes and research on TV. RCA made money every year in the 1920s and never sold above a 40 PE.

  • jmski52jmski52 Posts: 19,828 ✭✭✭✭✭
    edited October 30, 2019 8:48AM

    Gov.com needs the capital gains tax money, and has nowhere to turn to finance their mushrooming government spending, including both funded and unfunded liabilities.

    The motivation is to keystroke as much imaginary money into existence as can be accomplished without alarming the general population, but that's become much harder to do, since more than half the country wants to be supported in the manner to which we/they have become accustomed via handouts - and the other half pays income taxes as a result of doing "work".

    Since the banking & political "industries" are first in line for the gov.com handout largesse in very significant ways, there's no reason to expect things to change. They don't know what to do with someone from the private sector who successfully makes it into high office, because the money flows are from entirely different sources which are diametrically-opposed to each other.

    The stock market requires keystoked money when organic growth isn't taking place as fast as the liabilities come to maturity. This has been the case for decades, and nothing has changed. The Achilles Heel for the economy is the bond market. The debt simply can't be sustained without more and more and more imaginary money.

    As I know cohodk will soon chime in, I say "Boo!" Happy Halloween! :p

    Q: Are You Printing Money? Bernanke: Not Literally

    I knew it would happen.
  • BaleyBaley Posts: 21,272 ✭✭✭✭✭

    Liberty: Parent of Science & Industry

  • TwoSides2aCoinTwoSides2aCoin Posts: 40,833 ✭✭✭✭✭

    Well if we drained the swamp...
    And repealed the FRB's egregious act of 1913... we'd be poor old farmers again.

  • cohodkcohodk Posts: 15,840 ✭✭✭✭✭


    Excuses are tools of the ignorant
    Knowledge is the enemy of fear
  • rawteam1rawteam1 Posts: 2,425 ✭✭✭

    Wow, cool, Taps for the dbc movement...

    keceph `anah
  • WCCWCC Posts: 415 ✭✭✭

    @jmski52 said:
    Gov.com needs the capital gains tax money, and has nowhere to turn to finance their mushrooming government spending, including both funded and unfunded liabilities.

    The motivation is to keystroke as much imaginary money into existence as can be accomplished without alarming the general population, but that's become much harder to do, since more than half the country wants to be supported in the manner to which we/they have become accustomed via handouts - and the other half pays income taxes as a result of doing "work".

    Since the banking & political "industries" are first in line for the gov.com handout largesse in very significant ways, there's no reason to expect things to change. They don't know what to do with someone from the private sector who successfully makes it into high office, because the money flows are from entirely different sources which are diametrically-opposed to each other.

    The stock market requires keystoked money when organic growth isn't taking place as fast as the liabilities come to maturity. This has been the case for decades, and nothing has changed. The Achilles Heel for the economy is the bond market. The debt simply can't be sustained without more and more and more imaginary money.

    As I know cohodk will soon chime in, I say "Boo!" Happy Halloween! :p

    The current fake prosperity will last only as long as the artificially cheap money and absurdly lax credit standards do and then it's over. It's outside the scope of this message board but I expect most to be amazed at how the social decay is exposed once it ends. It won't be an event but a process with a point of recognition.

    As for the current economy, it's bifurcated. It's great for a very low proportion, good for slightly larger percentage, ok for a noticeable minority but not good for most everyone else. We've seen the data and anecdotal reports. Most people are broke or near it and can "afford" a middle class lifestyle only because of easy but not necessarily cheap credit.

    I expect the 2020's to be a lot worse than this decade, both for the financial markets and the economy. I don't think the economy will fall apart (yet) but most people are going to be visibly worse off. Probably multiple serious economic contractions, at least more serious than most since WWII. Since history doesn't repeat exactly, I won't be surprised if the next recession isn't as bad as 2008, though by logic and common sense it should be worse. If there is a second one in the next decade, watch out.

  • AUandAGAUandAG Posts: 21,486 ✭✭✭✭✭

    Certainly some correlation. When the economy is good people spend money. When people spend money Corporations make profits and report growth in the product or services they sell. Thus the good economy helps a stock market to rise. Of course not all profit from this or even benefit from it.
    As an educated Accountant I refuse to invest in companies that don't make money...boy has that been a big mistake at times. So, even if a corporation is losing money it's stock can rise on sales or just perception of future profits. Kind of like Tesla and many more.

    bob

    BST deals: Dozens of buys/sells. Will provide a list upon request.
    Registry: CC lowballs (boblindstrom), [email protected]
  • cohodkcohodk Posts: 15,840 ✭✭✭✭✭

    Prudence is always justified.


    Excuses are tools of the ignorant
    Knowledge is the enemy of fear
  • thisistheshowthisistheshow Posts: 2,134 ✭✭✭✭✭
    edited October 31, 2019 8:51PM

    No.

    I am typing this answer before reading through the thread.

    In my opinion, the "economy" and the stock market are not correlated like that. They both effect each other, certainly. But these record highs do not mean the economy is at a record level of strength. The economic systems in place in the USA are so different from how they once we're.

    I would like to add that, for people like me who are not wealthy and need to try to maximize their limited savings, the stock market is a great tool.

  • topstuftopstuf Posts: 13,474 ✭✭✭✭✭

    "Limited savings" and "stock market" can make strange bedfellows.

  • thisistheshowthisistheshow Posts: 2,134 ✭✭✭✭✭

    @topstuf said:
    "Limited savings" and "stock market" can make strange bedfellows.

    Yes, they can. By limited savings I actually meant limited money to invest. An emergency fund, etc must come first.

    Older generations could count on basic savings accounts to provide interest. Many would counter this by say higher interest rates were not a good thing. But "regular" people, living in a time of MUCH cheaper everyday costs, could often do well with this interest if they were frugal. That just doesn't exist today. To keep up with modern inflation (which , imo, is actually MUCH higher than our government lets on), you must seek return on savings. The stock market will kill people who are uneducated. But even in a bear market, gains are there to be had. Due diligence is a must. DO not invest everything. Have an emergency fund. Carry very low debt. This must all come first.

    But yes @topstuf, "limited savings" are not to be put into the market. Thanks you for correcting me.

  • coinpalicecoinpalice Posts: 1,773 ✭✭✭✭✭

    a unemployment rate of under 4 percent is a sign of a good economy, and people are spending money which is another good sign

  • derrybderryb Posts: 27,428 ✭✭✭✭✭
    edited November 1, 2019 7:25PM

    @coinpalice said:
    a unemployment rate of under 4 percent is a sign of a good economy,

    if and only if, your formula for counting the workforce is truely counting the workforce

    and people are spending money which is another good sign

    Not if they are using debt to get that money.

    The single best yardstick for measuring the economy is total personal savings.

    “We can ignore reality, but we cannot ignore the consequences of ignoring reality.” – Ayn Rand

  • cohodkcohodk Posts: 15,840 ✭✭✭✭✭

    @derryb said:

    @coinpalice said:
    a unemployment rate of under 4 percent is a sign of a good economy,

    if and only if, your formula for counting the workforce is truely counting the workforce

    and people are spending money which is another good sign

    Not if they are using debt to get that money.

    The single best yardstick for measuring the economy is total personal savings.

    https://fred.stlouisfed.org/series/PSAVERT

    Looks to be near generational highs--levels similar to early 1990s.

    Or...did you mean total amount in savings accounts?

    https://ycharts.com/indicators/us_total_savings_deposits_at_all_depository_institutions

    At an all time high. So i guess you are saying the economy is doing quite well.


    Excuses are tools of the ignorant
    Knowledge is the enemy of fear
  • blitzdudeblitzdude Posts: 1,885 ✭✭✭✭✭

    All I know is my 401K balance is boomin. The metal stack continues to get a bit heavier (and more difficult to store) but it's not getting me anywhere fast. If you can't beat the paper puppets sometimes you just got to join them.

  • ExbritExbrit Posts: 487 ✭✭✭

    It does until it doesn't!

  • derrybderryb Posts: 27,428 ✭✭✭✭✭
    edited November 2, 2019 10:40AM

    Federal reserve data. LOL

    don't they count this as a job?:

    “We can ignore reality, but we cannot ignore the consequences of ignoring reality.” – Ayn Rand

  • cohodkcohodk Posts: 15,840 ✭✭✭✭✭
    edited November 3, 2019 11:51AM

    @derryb said:
    Federal reserve data. LOL

    If the data is so bad, then why have you posted FED links dozens, if not hundreds of times?


    Excuses are tools of the ignorant
    Knowledge is the enemy of fear
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