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The Stock Market vs. The Economy

It is easy for investors to see economic news, like unemployment or GDP data, and get worried or excited about the impact that it will have on their investments. But there is something that many investors don’t realize. The stock market is not the economy, and the economy is not the stock market.

Referenced in this video:
– Inverted Yield Curves and Expected Stock Returns:
– Is Economic Growth Good for Investors?:
– Earnings Growth: The Two Percent Dilution:

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45 COMMENTS

  1. “the economy should not inform your investment decisions”…cool set of data and great analysis. I’m convinced. Thank-you for all of your hard work.

    • I would agree partly, but I think this CFA is a bit Naive to make a false assumption and false conclusion about today’s events, just by taking a couple of random research articles to make the obvios point that the stock market and the economy do not correlate, that is very true obviously no need to take peer-reviewed research articles (not my field of expertise I would say, but being a scientist I came across a lot of bullshit science in peer reviewed journals). I would agree with it, but this is not 2009 first of all so you can’t compare it, we are living through something completely different. 2009 was all about liquidity something people can control and people can come to terms with by regonotating or declaring bankrupcies but now in 2020, this is all about economics and permanent job loss becuase of the pandemia. Wall street can’t buy the virus, nor can they negotiate with it, the virus doesn’t care about money or people (wall street expertise). Politician are clueless on how to handle it (except perhaps the asian countries) . I think the expertise lies beyond a “financial background” field and we should be more attuned to the expertise of the scientists who are studying the virus and what they have to say. I prefer to listen to them and their news than what a “financial analyst” says. We should also add wall street never saw the “Pandemia comming”, they are not experts in that, how can I trust then that their valuations are right now? There is to much uncertainty and risk for me here. Apart from that I also prefer to listen to what Charlie Munger says, hear his thoughts (being the fact that they have more information than the government itself!), and well things don’t look so bright.

  2. Economics really is clear as mud sometimes. I, like many others, assumed that the economy and the stock markets were more directly in step with one another. I also assumed that growing economies like China would result in tremendous stock returns. Its interesting to see the data back up what actually happens.

  3. Im convinced Ben is secretly Schofield from Prison Break, and he has all those tattoos hiding behind his shirt…

  4. This videos are always fascinating and give me a new perspective on whatever Ben is talking about. Great stuff as always!

  5. Ben deserves so much more recognition,
    It’s unfortunate to see channels that focus on market daily financial news and stock prices without any added value flourish.. keep it up Ben & thanks again!

    • I’m going to take awild guess and say that Ben doesn’t really care that much about a massive YT following, this isn’t his day job and he has a really great podcast too.

    • @@johnristheanswer I was saying that (and I’m assuming here) that this is his side hussle and it seems that due to him having a successful career apart from YT that he and his firm do this simply to inform rather as a source of income.

  6. Most investors fail to realize that the market is forward looking. The term “priced in” has never been more true after the recent unemployment reports.

    • Yea, just made a video on this. Would love to know what ya’ll think of my $1M portfolio allocation on my channel.

    • Horseshit. That’s what they said during the dot com crisis then again with the real estate crisis stateside. Massive losses in the stock market followed by significant gains shortly thereafter, then massive losses followed by significant gains. Repeat this process 5-6x over the course of 2 years is the CRISIS. It was never a one-time 50% loss in the market. It ALWAYS took on avg. 2 years. It’s “priced in” is a running meme at this point. There may be disparities in timing, but c’mon, 26M have now filed for unemployment. This is priced in???

    • That’s the thing though. At the moment, the stock market is not priced in. There are a ton of companies out there right now that will show little to no profits for the rest of the year, yet the market seems to think otherwise.

  7. Economic data is backward looking and markets are forward looking, important lesson that every investor needs to understand. Great video Ben!

  8. There was nothing “common sense” about this video — my mind kept on blowing. I’ll have to re-evaluate my whole understanding of the world now, thanks. (Thanks for great content as usual!)

    • That is just absolute rubbish. I can cite some real examples that are contrary to what he says. Really? I mean we should not pay attention to the economy in other words? How is that possible. Wall street has gone completely insane, “common sense” tells me that valuations are not corresponding to fundamentals. Where is the common sense in this video? There is none. As a business woman I am looking at asset bargains but they are hard to find. I dont care if the market rages on, I am not gonna invest in blue chip stocks with extremley low yields just because wall street wants to endelessly fuel the market with cheap fiat money. I think I will start a youtube channel and get a greater ROIC than the manipulated market to satiet my unfortunate human greed. There that makes more common sense to me.

    • @@americaromero7373 Can you cite those examples or articles? I’d be interested in reading them. Thanks in advance!

    • @@americaromero7373 he explains the economy does need to grow for long positions but this alone does not mean your specific positions will grow…and to be wary of share dilution

  9. In the words of Michael Scott, you are a gentleman and a scholar. Thank you for this, it was very informative. Keep up the great work, this is by far the greatest channel on investing.

  10. So much useful information clearly explained. Investors who get confused and angered with stocks rising with the recent historically high unemployment should watch this. Thanks Ben!

  11. “Intuition does not mix well with investing.” No kidding. As a young investor, this is one of the most important videos I have seen, so thank you!

  12. This has to be the best channel on youtube, all categories. great job, every video ridiculously high quality! Thanks

  13. This is channel is just fundamental and mixed in such a splendid way empirical and academical evidenced. Thx Ben, I’m learning so much from your videos and papers 🙏🙏

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