Analysis of news headlines shows reporters trotting out economic worries as a sort of explanation every time the stock market declines, strengthening the mental correlation between the two. Headlines like "Wall Street Slide Sparks Double Dip Concern" and "Stock Market Tumbles as Fears of Global Slowdown Rise" are the same every time; the first is from last July and the second from last week.
Stephen Todd, editor of Todd Market Forecast, wrote: "It's astonishing. I keep hearing financial commentators, many of whom have long experience, suggest that the market can't make headway for the remainder of the calendar year because the economy is so poor. To this we say nonsense. From March 2009 until April 2011, the Dow rose 6,200 points or 92%. During that time, the economy was in the doldrums. To be specific, the unemployment rate went from an already high 8.5% to an even higher 9.1% during that period, even touching as high as 10.2% at one point.
John Buckingham, editor of The Prudent Speculator, added: "We also remember that we are investing in business and not directly in the U.S. economy. As Fed Chairman Bernanke said last week, 'The business sector generally presents a more upbeat picture (than the household sector). Manufacturing production has risen nearly 15% since its trough, driven importantly by growth in exports. Indeed, the U.S. trade deficit has narrowed substantially relative to where it was before the crisis, reflecting in part the improved competitiveness of U.S. goods and services. Business investment in equipment and software has also continued to expand. Corporate balance sheets are healthy, and although corporate bond markets have tightened somewhat of late, companies with access to the bond markets have generally had little difficulty obtaining credit on favorable terms.'
For more: The Stock Market is Not the Economy
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