Ever since the housing crash of 2008 and the stock market crash that followed, there has been an undeniable trend in our economy. As soon as the Fed began its quantitative easing program, the stock market started to recover. The more cash they dumped into the economy, the higher NASDAQ would soar. To the central planners in Washington, this was a recovery, but to the average citizen it was anything but. Just because the stock market was improving, didn’t mean our finances and standard of living would improve with it.
That’s because the stock market has little effect on the real economy. In fact, it’s more of an indicator for the strength of the economy, rather than the cause of that strength, and that fact only counts if it hasn’t been tampered with. The market capitalization of a company is merely the valuation of that company’s ownership, and nothing more. It should (theoretically) go up if that company is profitable, and go down if they are in the red. So if the economy is in the toilet, the value of these companies should go down. Right?