The Disconnect Between Stock Markets and the Economy

Photo by Chris Liverani on Unsplash

   If the economy is in trouble, why are the stock markets going up?

   This is a question many people have been wondering about, especially with the high unemployment rate and millions of Americans struggling to stay afloat with only the help of government issued programs. The past year was not a good one for the US economy, but the stock markets soared.

   According to Forbes Advisor, 2020 ended much like it began, with stock markets reaching all time highs. And these facts may not be surprising at all, but we have to take into account the historic events that occurred, “namely the worst global pandemic in a century and the almost shockingly brief bear market that accompanied it”. 

   The economy and the stock markets are not the same. The economy is the system where money, industry and commerce are organized, and the stock market is a public marketplace in which financial instruments such as stocks are bought and sold.

   The stock market is only going up because of a few big and prosperous companies that are nearly monopoly status, such as Amazon. These companies are able to make huge profits because they can keep wages low. According to US News,  many companies use gig workers which “reduce demand and hurt economic growth”. These lower-paid workers are also expendable when demand for goods and services slows. Stock markets are still able to grow and expand, even though the economy is not doing well at all.