A harsh reminder: The stock market is not the economy

The stock market and the working stiff rarely are on the same page and today’s nearly 600 700-point decline in the Dow, capping its worst week in two years, comes partly because workers finally — finally — started getting a piece of the pie.

Investors hate that.

There’s just too much good news to keep them happy, a testament to the fact that the stock market is not the economy.

The U.S. economy added 200,000 jobs in January, according to the Bureau of Labor Statistics. Economists predicted 180,000. That’s good. Except for the stock market.

Wages, which we’ve been told for nearly 10 years would eventually have to start rising, actually went up 2.9 percent on an annualized basis. Good news? Maybe if you work for a living. That’s the biggest spike in earnings since 2009.

“I think the market is now thinking of the possibility that the Fed could raise rates four times this year rather than three,” James Ragan, director of individual investor group research at D.A. Davidson, tells CNBC.

In any event, it doesn’t make much sense to try to make sense of Wall Street so long as it appears that good is bad and bad is good.

Not that people won’t try, of course, even if the economy is too complex to make simple political proclamations.

Besides, in the big scheme of things, the market hasn’t moved that much. The Dow is back to where it was on January 10th.

Marketplace’s Kai Ryssdal tried to temper our enthusiasm when the administration was claiming exclusive credit for the bull market a year ago when the Dow passed 20,000.

So Ryssdal could be forgiven today when he said, “I told you so.”

  • >>Oh look. Markets go down, too. Huh.<<

    The snark is strong with that one.

    /And we know very well that the markets go down…one just has to pay attention.

    • RBHolb

      Every now and again, some Clever Person will argue for privatizing Social Security by saying how much more an investor would have received if he or she had been able to put their money in the stock market, instead of into the Social Security trust fund. What they’re overlooking (perhaps intentionally) is that the numbers they are repeating are average numbers. Some investors made more than the average, but a lot (the majority, in all likelihood) made less. That’s just how numbers work.

      I will leave a discussion of what the effect injecting all of that additional money into the market would have been. You can’t change one thing.

      • And the trouble is once Social Security is disbanded and people start putting money into IRAs, 401’s, and 403’s, you can trust politicians to not change the rules at some point down the road and strip out the tax benefit and incentive of doing so.

        • jon

          401ks are great… Until you start looking at the specifics… Then they are great for somethings…

          I don’t think most people understand how they work… Even those who are using them.

          After years of vigorous savings I’m either on track for retirement, or way ahead depending whose definitions of what on track looks like.

          As my parents retired, I learned how the rules for getting money out of a 401k work…
          I’ve scaled down my investment in the 401k since…
          No one talks about being over invested in a 401k, but it’s a thing. I’ve got an HSA not I’m hoping to leverage to cover any gaps between retirement and Medicare… And a after tax savings/investment I’m hoping to use to cover the gap between retirement and 59.5 when I can get at the 401k… And I’m hopping to make those gaps as large as possible.

          But I can appreciate than my father (now retired) didn’t have a 401k when he started working, and HSA’s are a new thing as of a few years ago… So when I actually retire the rules probably will have changed… And as something who actually bothered starting to plan for this 30 years early the thought is terrifying.

          • Rob

            Basic rule of thumb that I’m using is that a person is set for retirement when the amount they have in savings/liquid assets is ten times their current salary.

          • Jack

            Colleague of mine shared with me yesterday that one nursing home he visited is charging $150,000 per year. Just how long will our retirement dollars really last? It really depends on someone’s long-term health.

            I think the rule of the thumb cited is good if someone isn’t using debt to finance the lifestyle s/he is living. If debt is involved, all bets are off. Also – get the debt paid off before retiring if at all possible. Far easier to live in retirement if one isn’t paying for the place that s/he is living in.

          • Rob

            Rule of thumb assumes little or no debt.

          • jon

            That sounds low to me… But I really don’t know because it’s hard to get good roles of thumb, Especially when all the rules of thumb are written with people who aren’t saving at all in mind.

            I’ve seen that in retirement you should shoot for 80-100% of your income… (Rarely with mention of inflation as a consideration)
            But 20% of my income goes into some sort of savings vessel already (some pre-tax some post), and and 15-20% of it goes to pay for the mortgage I didn’t plan on having in retirement… So apparently I should plan on giving myself a significant raise for retirement… And I’m not counting on social security being around so that’s an even bigger raise if it is still around…
            (Which is how I’m planning, because a raise for retiring sounds good, and a larger margin of error is better than none.)

            And looking to retire early is it’s own level of crazy, every year before Medicare kicks it is harder to retire, every year before social security kicks in it is harder, every year before the 401k is available makes it harder, basically the rules change depending on your age already, and they’ll probably change again before I get to those ages…

          • It depends what you mean by retiring early

          • Dying in my cubicle is my plan…

            Or this:

            https://www.youtube.com/watch?v=BVBHxxo3TKE

          • Jack

            Not to mention obtaining reasonably priced health insurance coverage. It’s what keeps me in my job (I’m not ready to retire yet).

            Now if we had universal health care, I’d be rethinking my retirement age.

          • Rob

            The SocSec administration loves people who work until they’re in their mid to late 60s (or beyond), cuz then it has to pay them less. I know several folks who had the financial means to retire early, but didn’t. A couple of them died in their early 70s; another literally stroked out at his desk two weeks before his trigger date for retirement.

            My father-in-law died at age 73, but because he could afford to retire early, he did. He was healthy and engaged with life until about a year prior to death, and was taken by aggressive, fast-acting cancer. I was at his deathbed, and I can say with certainty that his last words were not: “Wish I’d spent more time at the office.”

          • I’m pretty much doomed…

      • jon

        Here is the beauty of the stock market, any one can do as well as the average with an index fund.
        Those who believe they can beat the market won’t use an index fund and they’ll pick their own winners and losers, they might beat the market, they might fall behind the market, and they might lose money completely.

        Now there are plenty of good reasons not to privatize social security, but when we can all hot the average, pointing too the people who chose to take more risk than that as a cautionary tale really seen like the caution should be in moving yourself out of the bucket of people who take the average return.

  • Gary F

    Most bull runs go through a rough week or two as people sell and take some of their gains. It happens most of the time. I was expecting it before the end of last year, and that didn’t happen. Good for the people hanging onto cash as they will now get in market over the coming days or weeks. But it is fun for the media to hype this as a Trump collapse seeing they need something to cheer or snark about.

    • Haven’t seen a single analysis calling it a Trump collapse. What I see is professional journalists providing analysis and facts about what happened this week and doing a splendid job.

      You, on the other hand, create a reality for yourself that fits the bias you choose to bring to each morning and every now and again, you need to be reminded that it’s not real.

      The media has done a fine job on a complicated story despite growing evidence that the audience is either incapable or disinterested in complicated facts and knowledge.

      • I haven’t seen any of today’s serious media state anything but the news that the market is down along with the final numbers for the day. However, I hear constantly from one of my friends who is a Trump supporter about how wonderful each day’s gains are because – Trump! And the president does talk up the stock market as if it is his accomplishment and he implies that the market = the economy. So even though it isn’t – as I remind my Trump supporting friend – it is a common misconception.

        • Well, I don’t think there’s any question that the Trump presidency was viewed favorably by Wall St. and that the run-up during the health care debate was under the assumption that as soon as that was taken care of there’d be a tax bill and the tax bill was all the market cared about. So, naturally there was a runup in the aftermath. And that’s now all been factored into things so your friend is right, to a degree.

          Eventually all of that has to give way to the nuts and bolts of economics and now, just as they were consumed by the tax bill, they’re now consumed by the prospect of higher interest rates.

          Personally I moved 1/3 of my retirement portfolio into fixed rate five months ago and sold a bunch of funds when I saw the Asian markets tank on Tuesday and headed for higher ground, mostly because I believe the axiom, “nobody ever lost money taking profits.”

          The partisans are gonna do what partisans are gonna do; it’s why they get up in the morning and the rest us just need to shut out the noise and pay attention to the sweet goodness of facts and math and be comforted by the knowledge that in turbulent times, at least we have a life.:*)

    • Rob

      Give me a cite to the media who are calling this a T-Rump collapse.

      • jon

        I did see an article pointing out it was down 666 points.
        But that is as close as I’ve seen to anyone suggesting it’s a Trump collapse… ( The “Trump collapse” I’ve seen people talking about is the break down in the rule of law the GOP seems to be pushing for as they engage in open war on law enforcement.)

  • Jack

    The thing that keeps me up all night is how companies are being run to maximize “shareholder value” with little to no regard for how it is impacting the work force. Come on folks – once you lay off your employees because you can get cheaper labor in XYZ market, who do you think is going to buy your goods and services locally?

    Throw in the fact that very few companies have pensions for their employees, instead encouraging them to join the market with their retirement dollars in the 401(k). Wake up! If the market crashes, it’s going to be a lot of retirees (or folks who want to retire) who are going to be huge losers.

    Stock Market is just another term for Ponzi Scheme.

    • Jerry

      Corporate priorities are in order:

      -executive profits
      -shareholder profits




      -long term health of the company





      -customer experience



      -well being of the average employee

      • kevins

        Amen

        • Jack

          Don’t forget the Enron employees who were encouraged to keep the company stock in their 401(k) while the execs knew Enron was going to collapse – and the plan was put into a black-out period. One of the regulation changes that was made as a result of that action was a limit on the duration of 401(k) “black-outs” (freeze on the ability to change to buy and sell securities).

          As someone far wiser then me once said, don’t risk both your paycheck and your retirement savings on the same company.

          • kevins

            Amen again.

  • ec99

    The Dow is made up of 30 stocks, and long ago ceased to be a barometer of the market. Also, several of its components came up with disappointing Q4 earnings: DWDP, XOM, CVX. It’s still above 25,000, though.

    • Generally the trend of the Dow is also the trend of the market as a whole. Day to day, no. But the trend is clear.