Why do "experts" use the profits of multinational corporations as a basis for the health of the U.S. economy?

Question

The stock market is made up of multinational corporations and their profits from activities in the U.S. only account for part of their profits.

Answer 1

Experts use GDP growth, productivity increases, and unemployment rate to measure the health of the economy. Stock prices in the past have been a indicator of future GDP growth, but it is not the only one or even the best one. The profits are not the cause of the economic health but a result, and the stock price represent the best judgment of investors about future profits. The growing importance of multinational weaken it predictive power, but many of the economies in the world are linked to the US economy so it still works better than one might expect.

Answer 2

Most multinational companies listed in US stock exchanges are the owners of the investment they made outside the US and earn income from these investment assets abroad. These earning that flows into US companies in the US are part of the US National Income and are ultimately earned by US shareholders based in the US. So, even though rise in corporate profits may include earnings from operations abroad, the experts are right in trying to analyse the growth in the total profits of the US multinationals to figure out how the US economy is doibg. However, if the profits within the domestic economy declines but profiots earned abroad increases more than the domestic profit decline, the experts will make appropriate comments on how the domestic sector in US is stagnating.

Answer 3

US based multinantional corporations are used for lots of reasons. The most important reasons being employment and investment return.

1) They employ lots of US citizens as well as foreign, so there is an employment factor as that plays a huge part in the US economy.

2) The biggest factor is that US based multinantional corporations are mostly owned by US citizens (US citizens make up the majority of stock ownership in the companies) so those large global profits come back to the US in the form of dividends and higher stock prices on us exchanges, which has massive effects on the US economy.

Just think of a few large multinational corporations, then think of how many people or US citizens own shares either directly (hold a certificate though a broker) or indirectly (hold shares though mutual funds, funds in 401k's, IRA's, the multinational corporation's employees own stock though stock options and other company incentive programs). With such a large number of US citizens effected by large profits or losses to multinational corporations you can see how important they are to the US economy even though their business is global, because their gains or losses effect national wealth so heavily.

Answer 4

because most of US companies in US contributes only a fraction amount of the whole pie. Most contributions come from US companies overseas. www.onlyinmalaysiamah.com/?ref=ziehas

Answer 5

headquarters are in US, so most of profit is in US, even if it generated by activities abroad.

Plus stockholders are in US, so they spend their dividends in US and take loans using these stocks as collateral in US.