The Stock Market is NOT the Economy

Computer screen showing stock market trends

You’ve probably seen the articles trying to predict the stock market. Or, maybe, you’ve heard from your friends how the economy is doing. But, what’s the relation between the two? And, how do the stock market and economy differ?

While some people use them to refer to the same thing, the stock market is not equivalent to the economy. 

What does the stock market show?

The stock market is a single institution within the economy. The stock market does not represent the totality of the economy. Many small businesses and workers that make up the economy don’t have a stake in the stock market.

In addition, the stock market does not represent an equitable overview of the people invested in it. While roughly half of Americans invest in the stock market, those who do are disproportionately white and wealthy. This means that many historically oppressed groups are not well represented in the stock market. 

While all of us at Invested Interests want to change this narrative, the reality is that nearly 85% of the stock market is controlled by the top 10% of earners in American. And, experts believe the proportion of the market controlled by the wealthy could be growing. More firms need to begin investing in an economically diverse clientele to support the redistribution of assets, especially stocks. Invested Interests commits to this through a $0 minimum investment to make our services available to a variety of investors. 

However, until this changes, when we look at the many fluctuations of the stock market, we are Rather, what we are seeing in the stock market unpredictability of the assets of the wealthy. The stock market does not drive the economy nor does it necessarily reflect it, especially in the short term. 

What can investors do?

So, when considering investing, it is almost impossible to time the market. Any sort of unpredictable change upsets the market. Look at the last month, the presidential election has thrown the stock market up and down as it tried to predict the outcome. Over the last spring and summer, we saw similar irregularities in response to the COVID-19 pandemic.

Rather than try to time out the stock market, a better (in our opinion) option is to consider your personal finances. If you have the means to start investing now, talk to a team member. There will always be a worse and a better time to invest. 

And, try not to panic when the stock market fluctuates. You never know how the market will change, but our top-notch team will always aid you in your financial ventures. Reach out to start investing with us today.