How is the economy and the stock market connected?

manofsteelx20: How is the stock market and the economy connected?
If the stock market does bad does the economy also do bad? Or is it the other way around? How and in what ways are they connected?

Answers and Views:

Answer by jaykay belives that a person who
When we talk about economy you have to understand that it relates to overall country’s progress bringing high and required returns and so the companies are fairly progressing in the financial aspects. Of course this does relates to indications for investments investors buying equity shares to flair their portfolio benefiting with this economy already progressed.This is how predictions are graphed into future expectations to rise prices and connection does apply.Viceversa a reverse situation you see when economy and progress dulls the markets.Apart from this speculations also attracts the prices where a big boom starts and all are running to buy to put them on a high level.

Answer by AZNYC
Your question is not so simple. The economy and the market are all part of a very complex and chaotic system.

What I’ve heard is that the stock market is usually ahead of the economy. Stock market recovers because investors EXPECT the economy to recover in the future. So you could say the stock market is a predictor of the economy.

Answer by [email protected]
It`s a complex system. They are both interconnected and one drives the other – a chicken and egg situation.

Industry needs a huge money pool to draw from to keep their business going. Investors invest in these businesses, hoping they are going to make a profit and pay out dividends and show a profit.

No money, no flourishing businesses. Failing businesses, get what`s left of your money out quick. So everything slows down or stops = recession or depression. Stagnation.

This roller-coaster must be kept running, or everything crashes.

Answer by Net Advisor
It used to be “the market moved the economy.” (1990’s-2000),

In 2008 the “economy moved the market.” Since March 2009, “the market is moving the economy” so they think.

Some people in the media think that wall Street and main Street are separate. They are completely connected via 401(k), Pension, other retirement accounts, and individual investing.