Economics and the Stock Market

In this world there is economics and there is the stock market. The problem comes when people start to assume they are the same thing.

Don’t get me wrong they are related. If the economy is doing great then sooner or later so will the stock market. If the economy is doing poorly the stock market will probably go down.

So what is the problem? The problem is that this doesn’t always happen like that. There have been many times where the news comes out saying something like we created X amount of new jobs and the stock market crashed on the news of growth. There is just not a 1 to 1 ratio there. If it was then the news would not have such a terrible track record for picking stocks.

In other words next time you hear something good on the news it does not mean that there is money to make in that stock or sector. If you jump in every stock with good news you will be just like 100 million other American who flock from stock to stock and wonder why they are not making any money.

Instead the people who are making money are creating their own systems, and following them. I have not heard or met anyone who was successful in the stock market that bases their judgment off of what is happening in the economy at this particular point and time.

I have met traders who do listen to the news here and there, but when the time comes to placing a trade they still ignore what they have heard and follow their rules. And that really is the only way to get a good return year after year.

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