Why are we so obsessed with the stock market?
“The stock market is not the economy” is something most of us are accustomed to hearing by now. Many a weary economist repeated this to incredulous interviewers during the latter half of 2020 while markets quickly recovered, climbed to more record highs, leaving many Americans wondering: “How can this be?”
I expect this will continue to be the refrain in 2021 until either the market veers in a southern direction, or the economy shows signs of improvement. I’m not here to explain why that is, because:
Making macroeconomic predictions always smacks of hubris, and is usually futile.
I detest the torturing of statistics to prove a point.
I’m not qualified to anyway. (I’m aware the list could have been shorter if I’d started here).
I do, however, think it’s worth making the point that this fact should need to be repeated to the general public each time the economy takes a dive and markets carry on as if nothing is happening.
How can we have such a poor collective understanding of something with such a strong impact on our lives?
We may hear about the GDP once a quarter, or unemployment numbers once a month when reports come out, but most of us never hear mention of Disposable Personal Income (DPI), Personal Consumer Expeditures (PCE), Consumer Price Index (CPI), or any of the other of the long list of metrics which correlate more strongly with the average American’s experience in the world and what they can expect in the months ahead.
The S&P, The Dow Jones, and The NASDAQ, however, are tracked and reported constantly, like a storm system. No increase or decrease is too small to mention. It’s rational to assume something reported in this way is important and I suppose it is, if you’re a day trader, but to the majority of Americans, whose only holdings, if they have any, are in a retirement fund like a 401k, these updates are overkill. So why do it? I have a few theories, but it leads down a whole rabbit hole of polarizing political stuff and maybe some conspiracy theories, so let’s not.
But what if, for example, CNN ran some of the aforementioned economic indicators in a ticker at the bottom of the screen in lieu of stock prices? Most people wouldn’t understand what it meant, but if anchors commented on it every day, people would take notice and eventually we’d become a nation of economically literate people, which. . . no one in a position of influence or power really wants. Hey, I warned you it gets conspiratorial.
I’m reminded of the iconic bronze sculpture of the charging bull outside the NYSE. One part of its anatomy is much brighter than the rest, having been buffed to a radiant glow by decades of visitors caressing it.
It’s a disturbing metaphor.
