Does the Improving Stock Market Mean Improving Economy?

Some market followers and investors believe that the stock market is improving and the US's worst days are behind them. But is it safe to rely on an "ever-so-changing" stock market as the determinant of the economy's well being? As much as we'd like to believe that a turn around in the stock market means a turn around for the country, the economy is weighted on more than our stock exchange. It is true, the market has improved since the beginning of the month. March 6 has been viewed upon as the "low" by some. Since then, the market has been improving. The Standard & Poor's Index increased approximately 14% and just this morning, the market rose 4%. To aid our increasing stock market position, the government is trying to step in and boost the rise. By increasing the spending, the government is hoping to restore some security and balance in our system. Even Ben Bernanke thinks the "recession will end this year."

Ben Bernanke? Isn't this the same guy who, although was upset about the situation, still defended the government's decision to bailout AIG once again? And wasn't it in that following week that AIG declared a $164 million payout of bonuses to its execs? Are we supposed to believe a guy who will defend a company that is hurting our economy with its irresponsibility and poor usage of federal aid? Please believe that I do not want to spoil Bernanke's name nor his reputation. However, I do not want to put my trust in such a strong and life changing declaration. I'd rather stay closer to Doug Peta, stock market strategist, and John Merrill, CIO of Tanglewood Wealth Management. Both agree that the market is doing better, but it is not a clear indication of an uphill ride. One factor they focus on is unemployment, a critical piece of our economy. Unemployment is high and will not disappear as fast as the stock market will increase. And although the stock market is an usual indicator of what the economy will do in the future months, the stock market is known to change very quickly. Remember, how the stock market moves is based on what people perceive. Until people have shown true faith in the status of the economy, we might want to keep our dependence on the stock market to a minimum and just continue to hope for even more better days.

Sources:
1. Steverman, Ben. "Stocks: Is the Worst Over?" Businessweek. 23 March 2009. 23 March 2009 <http://www.businessweek.com/investor/content/mar2009/pi20090320_846632.htm>.

2. Mohoni, Deepak. "Stock Markets Improve Further." The Economic Times. 23 March 2009. 23 March 2009 <http://economictimes.indiatimes.com/Features/Investors-Guide/Stock-markets-improve-further/articleshow/4302869.cms?curpg=1>.

3. Arends, Brett. "The Recession's Early Winners." The Wall Street Journal. 23 March 2009. 23 March 2009 <http://online.wsj.com/article/SB123758303567499201.html>.