Stock Market News
How will the recent news about the stock market affect me personally?
When the Dow Jones average falls it seems to get everyone concerned. What is the connection between the stock market and the average consumer? I know its harder to get a bank loan, right? And how are we looked upon by other countries?
Think of the stock market as a reflection of business confidence in the US economy. If stocks go up in value, it means that business is doing well, or is expected to do well, based on expectations that the economy will continue to grow. If the stock market is going down, it means that something has led investors to believe that the economy is not going to do well.
Don’t be confused by the changes from day to day (up one day, down the next), but watch for the general trends, such as the way the market has been dropping for the past few days.
The day to day ups and downs are usually caused by one sector (Transportation stocks, for example) reflecting a concern about their particular area of the economy. For example, if railroad company earnings turn out to be lower than expected, it can drive the transportation stocks as a whole down, but the overall stock market could stay up. It’s the general trend of the market as a whole that reflects the short-term expectations for the economy.
If the general expectation is that the economy will “boom”, or even continue a steady growth, then the stock market would tend to be up. Expectations that the economy might slow down or even enter a recession would tend to drive stock prices, and the market, down.
The full answer to your question is long and involved, and takes a lot of economic factors into account, but for the most part this should explain the connection between the stock market and the average consumer.
The CBS Evening News with Scott Pelley – Market turmoil sends Dow down over 400 points
