How come the stock market continues to do so well when our economy's growth is slowing down quite a bit?

Answer 1

Well there are several reasons for this. Chiefly that the NYSE which I am guessing you mean when you say stock market contains a bunch of ADRs. BP, Toyota, and a bunch more. It is possible for these stocks to carry the market higher when domestic stocks remain flat.

My next point is if you look at the Dow which is silly it is a selection of 30 stocks. Not a very broad slice of the market. Some where around 20 of these stocks have yet to reach their high after the crash in 2001. The 10 others (give or take) have done incredibly well.

My last point is, since our retirements have switched to IRA's and 401k individuals continue to pump money into the market every month. 50 years ago when the market was exclusive this wasn't always the case. Now as people don't have traditional pension plans anymore, they buy into thier mutual funds monthly. This helps the market.

Lastly the Stock Market isn't tied to the economy exactly. It is a reflection of it. Unemployment goes up it doesn't make the news until the latest unemployement numbers are released. In this aspect the market can be slow to respond to news and conditions.

Answer 2

The US market is a HUGE composite of interests and the desirability of our markets (as opposed to others) is relative and in the eye of the beholder.

The fact that the economy is slowing down doesn't effect the international buyers because dollars are cheap considering the Euro, Pound or Yen. The weaker our economy is the more a foreign interest can buy.

That $1 million dollar investment in Stocks, bonds or Real Estate
may only feel like $ 875 K to them.....Buy and hold...See appreciation from currency valuation and stock market appreciation.

Another component of the Markets well being is ''Supply and Demand" and since so many Pension & Institutional investors MUST acquire US equities daily this also leads to shorter supply and higher valuations (compte with foreign investors)

Answer 3

And I have heard something rather different. Except for the auto industry, one month factory output goes down but the next month it goes up. It seems to me (and others who are buying stocks), our economy's growth is slowing down enough so there is very little worry about inflation, and is slowing down slowly enough not to have a "hard landing." Just enough to have the preferred "soft landing." If it was slowing down "quite a bit" and needed help to prevent a contraction, the Feds would have reduced their short term bank lending rates everyone is watching. They have kept it the same for the last couple of times and is expected to continue to do so (by many) or to even raise it up a quarter point (by some) to slow the economy a bit more.

Answer 4

There are 3 reasons for any stock to increase in price and the market as a whole
1- Increase sales wth same profit margins which will improve net income and earnings per share
2-Improve profit margins by raising prices or cutting expenses
3-Buy back shares which can increase its earnings per share by merely reducing the number of shares outstanding.
Our economy, although slowing a bit by some measure, is still improving margins and buying back shares.
Hope this helps
boudames

Answer 5

75% of all the money currently invested in the United States of America's Stock Exchange belongs to Foreigners.

Haven't you heard?
The savings rate for Citizens of the United States of America IS NEGATIVE.

This means on average each citizen consumes all his/her salary and also borrows more money each month.

At this rate in just a few years 90% of the Stock Market will be in foreign hands.

The Chinese already hold OVER A TRILLION DOLLARS in Reserves and they get more money each second.

Even if the Economy in the United States of America slows to 0% the Stock Market will be fine.

Europe is already a bigger economy than the United States of America.

Answer 6

Wow, you have some really good answers. Jerry's is a really good reason. And also Ronatnyu's. Also consider the alternatives. Bonds paying 4.8% with inflation running at 3% and fully taxed. Overpriced realestate. Sort of makes me wonder why stock prices are so low. Not all, but many.

Answer 7

Retirement funds. People in other countries can also buy U.S. stocks. Many of the emerging markets are doing well.

Answer 8

What do you advise via " plenty estimated and estimated crash... of inventory industry". have been you the only waiting for this? have you ever invested interior the markets? if so, have you ever gained plenty? i are not getting the rational on your question! Mr. you need to do somewhat diagnosis! i think of that right this moment grow to be purely yet another "down" day interior the markets led to via an prolonged haul via the housing and credit disaster!

Answer 9

The economy is on track, not so hot and not so cold.