How can a stock market go up when millions of people are losing their jobs? 1

And how can a stock market go down when an economy is thriving?

Sadly, the two are often blurred together into a giant morass.

But they’re neither the same thing, nor have any causal relationship. 2

One can go up while the other goes down, or they can both go up or down at the same time, or one can lambada while the other tip toes through the tulips.

In fact, you might think of an economy like John Maynard Keynes did - as a measure of public happiness, or how well or otherwise all the activities and behaviours in a particular geography are working and mixing together. 3

As for a stock market, well, “the big money isn’t in the buying or selling, but in the waiting. So, you should buy on the assumption that they’re going to close the market the next day and not reopen it for five years” (Warren Buffett and Charlie Munger).   

And if you ever find yourself attempting to assess an economy or a stock market opportunity and conclude that it’s expensive to hire a professional adviser, wait until you hire an amateur.

If you found this note interesting and you want to chat about it, do get in touch.

Alan Steel, Chairman, Alan Steel Asset Management

1: Telegraph 8 Apr 2020
2: Forbes 28 Apr 2020
3: Research Gate May 2009