Why economy falling but stock market rising?
STOCK MARKET AND ECONOMY As you can see, between April to July last year, while the economy was falling, the stock market was rising. It’s due to two reasons. First, the stock market isn’t about the entire economy. Paul Krugman, a Nobel-Prize-winning economist, suggests that the stock market is about one piece of the economy i.e., corporate profits. The second reason: the nature of the stock market and economy are different. The stock markets are forward-looking and look towards the future. Whenever someone invests in the stock market, they think about the future of the corporates. Several investors in India believe that once the vaccine is readily available and when the lockdown lifts, the corporate lifts, the corporate profits will recover. However, the economic indicators are backward-looking. As the GDP data tells us that what happened in the previous quarter or year. So, the stock markets are forward-looking, while the economic indica