The economy and the markets are not the same thing. The economy refers to the financial state of the country (or world). The health of the economy relies on a system of supply and demand for products and services, which can be impacted by factors like unemployment and production.
But that system doesn’t necessarily affect the markets, which make up a network of stocks and securities that investors can buy and sell. These offer investors ownership of the companies that provide the products and services dictating the economy—but investors can buy or sell their shares regardless of current demand or production.
While the economy and markets are inextricably linked, they can perform in opposite directions. Because markets tend to run on subjective opinions and optimism, rather than a firm reality, they don’t necessarily reflect the economic health of the industries they represent. The economy doesn’t have to be booming for the markets to do well, and vice versa.
Want to learn more about this topic? Check out our blog!