The Stock Market is Not the Economy.
In a recent article in the Wall Street Journal, the writer opined that the stock market the economy had diverged from each other, and that won’t last long, and pretty soon, they’ll be back together. I think that sentiment is wrong.
I think that the economy and the stock market always diverge, and the stock market is way more volatile than the economy.
You know, the economy might have some things slowing, some things growing, while the stock market is up and down, sometimes a lot every day. They are not the same thing.
Also, the stock market looks forward. So you know, if we’re in a recession now or if we’re going to a recession in the fourth quarter, the stock market is already thinking about the recovery. So they’re not the same thing.
So when you hear news about the economy, don’t think that it means the same thing for the stock market. The other thing is that, of course, the writers always think very, very short term, and should you move in or out of stocks?
We think that whatever your asset allocation should be, it should be for the intermediate future, if not for the rest of your life. And that’ll be based on your circumstances, not what’s going on in the market every day.