Market And Economy

The further we go in development the further stock market goes from the economy

. The last stock market crash reveals that the bubble and crashes on the stock market drive the economy into recession; yet, the recovery on the market does not affect the economy.

By looking at the market indexes you may see that the Wall Street has recovered from the crash far ago. The economy on the other hand remains where it was two years ago, particularly at the deep bottom. The unemployment is still on the same high level, the housing market is still down, the states are still begging for money, the overseas debt is growing and the President is asking for another half of trillion dollars for another stimulus package. So, let me ask you if an economy is such condition could be considered recovered? Yes, the public companies are making money and we may see great earning reports. However if you take a look how they use their earnings you will see that they are not expending, they are not building new working places. What is actually happens is merge of the companies. All the earnings are spent to buy other companies and in some cases they are buying overseas companies (basically investing money into other countries)

The FED and administration have announced that the recession has officially ended. I am just wondering what criteria have been used to define the end of the recession. Did they use the major market indexes (Dow Jones Industrial Index, S&P 500 index and Nasdaq 100 index)? If yes, then I am sorry, those who trade on the stock market knew already (we had clear signals more than a year ago) that the stock market is in recovery. You do not have to wait for a year and half to say that. And if a conclusion about the end of the recession is based on the market indexes then the logical statement would be that the recession is ended on the stock market.

Yes, the stock market (Wall Street) not in the recession. Even more it almost recovered from the recession completely. Many public companies and many indexes, especially hi-tech indexes (Nasdaq 100, Nasdaq Biotechnology, etc) are above their 2007 high levels. However, you have to remember that the companys value on the Wall Street depend on the supply and demand on the stocks of this company.

Overall, it is wrong to compare the stock market and the countrys economy. They are two different entities which in some cases depend on each other however they move separately.

by: Viktor Ka

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