Stock market a poor indicator of economy
Economic advisors who try to keep track of the ups and downs of the stock market can be excused if their necks are a bit sore these days. Watching the stock market has been like watching an elephant on a bungee jump ride.
On Christmas Eve the Dow Jones Industrial average plummeted about 653 points, capping a four-day losing streek. Doom and gloom hung over Christmas. On Wednesday, however, the market took off like a rocket, rising over 1,000 points, it’s biggest day ever.
The explanations for Wall Street’s rises and falls are always interesting. The government jobs report comes out, and the market rises. Some company’s profit statement is lower than expected, and the market drops. The head of the Federal Reserve hiccups during a speech and it rises, then falls.
Monday’s fall, according to reports, was precipitated by President Donald Trump’s unhappy tweets about the Federal Reserve’s interest rate hikes. On Wednesday, the White House signaled that Trump would not try to oust the Fed chairman, Jerome Powell.
Over the long term, the stock market can be a decent indicator of economic growth, but the day-to-day bounces are more an indicator of investors’s skittishness than real economic trends.