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The Classic Thinking v Reality

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Lobo
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The Classic Thinking v Reality

Post by Lobo on Sun 21 Feb 2016, 2:01 pm

QUESTION: Hi Martin !
In a globalized interconnected world where we see stock markets falling 30% and more from their recent high entering bear market territory how can it be that the S&P 500 is losing ground far less? Especially considering key economic data like the ISM that reveals a rather negative view on the U.S economy.
All Best,
M
ANSWER: Even if the economy declines, does that mean you rush and buy government debt? Your question assumes stocks only rise with rising corporate profits based upon the domestic economy. That is so untrue it is laughable. There are two reasons: first corporate will make more from overseas than domestic, but more importantly, if government is the one in trouble, capital will park in equities just to preserve itself. Your line of thinking will cost you everything you own. Markets and economies do not function in that one-sided manner.
https://www.armstrongeconomics.com/armstrongeconomics101/basic-concepts/the-classic-thinking-v-reality/

    Current date/time is Wed 07 Dec 2016, 6:31 am