Stocks Are Soaring, The Economy Is Struggling: But Why?

The stock market does not equal the economy, so we decided to figure out why this discrepancy exists—and what investors can do about it.

This year has been one of doom, gloom, and if you’re looking at the stock market, boom. Which might seem a bit, well, disjointed. But it’s clear to us, and corroborated by our friends at The Motley Fool, that the stock market =/= the economy.

So we decided to look into why this discrepancy exists, and what investing info you need to ride out a year that can only be described as “one heck of a head scratcher.” 

Now vs. Later

Let’s get something straight, the economy is what is happening right now. The stock market is all about the future—and that doesn’t mean flying cars and meals in pill format—it just means that investing has always been about what will happen tomorrow. 

So while our current situation is changing minute-to-minute, investors have been surprisingly upbeat about what things look like down the road. Honestly, it’s not a bad metaphor for life; things are typically pretty dreamy looking out towards the horizon.

Ian McKinnon

A stock so nice they’ve shared it thrice. Tom Gardner, The Motley Fool’s co-founder, has found a stock he thinks may change the game for us everyday investors. From seeing the value in companies like Shopify (up 2,730%) and Nvidia (up 7,334%), his credentials speak for themselves. To get access to this up-and-coming stock, you need to be a member of Motley Fool Stock Advisor. Sign up here.*

*This is sponsored advertising content. Returns as of [09/14/20]

The Big Players Gonna Play

The vast majority of stock trading is done by big institutional investors (according to FINRA it’s about 70%), which is another reason the stock market has weathered so many storms this year. The suits on Wall Street tend to put their money in big businesses that are more likely to be able to handle a recession or economic downturn.

So while their actions may have something to do with all the green on your investing app, you don’t have to only play their game. Which is why we like to say…

Acquaint Yourself With Equities

If you’re looking to accumulate wealth over the long term—uh, no duh—historical analyses have proven that equities markets may be the most reliable way to do so. They are typically a good cornerstone for an investing strategy that will allow you to look to the future. Adding equities to a portfolio that utilizes cash management and diversification can be quite a potent money-making mixture.

Remember: the equities market is as big and varied as the stock market itself. So take this opportunity to do some research and find a strategy that fits your goals for the future. 

Looking Ahead

As investors, that should always be our focus. While following current events is essential to understanding market forces (and being a well-informed human), we should try and keep our gaze towards the horizon. Just because the economy and the stock market aren’t the same, doesn’t mean we can’t use lessons from both to ensure our financial future is as bright as possible.

Via Morning Brew

Related Posts