The Stock Market vs.The Economy

Monty Pelerin / Economic Noise

There are many reasons why strong stock market performance should not be confused with a sound economy. Zimbabwe, during its road to ruin via hyperinflation, had the best performing stock market in the world for a year or so. Now Venezuela’s stock market is booming while no one would accuse it of having a well-functioning economy.

As reported on Zerohedge:

Venezuela can be proud: while the US stock market has gone exactly nowhere in 2014, the Caracas stock exchange of the socialist paradise has continued kicking ass and taking names, just today printing a fresh all time high.

There appears to be a developing problem, however. The headline of the Zerohedge article is Venezuela About To Run Out Of Food Despite Fresh All Time High In Its Stock Market.

Apparently the Bernanke “wealth effect” does not travel well or is not understood in other countries.

On a more serious note, the US stock market is not the US economy. The US economy is sick, irreparably so. The market may continue to ignore this for a time, but it cannot levitate forever. It needs a solid foundation and there is none in sight.

Be careful!

http://www.economicnoise.com/2014/01/23/stock-market-vs-economy/