Why stocks keep going up even as the economy softens

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8. the stock market is not about the economy. the stock market is about profits for big public companies.

generally, "the economy" if a major factor in corporate profits, but the two are not the same and sometimes diverge.

one of the more obvious and routine ways is in regard to fed policy. corporate profits generally go up when interest rates go down. their interest expense on borrowing goes down; and if they have no debt, it's easier to consider loading up on debt to expand or buy other companies.

this is why bad news for the economy is often met with a stock market jump -- because they figure the fed is more likely to cut interest rates, and the thinking is that the lower interest rates will help corporate profits more than the bad new for the economy.


when there's a pro-big business government in office, it's also easier for big businesses to buy smaller businesses as a republican government is hardly likely to throw any anti-trust resistance in their way (well, nothing they can't buy their way out of with a donation to donnie...). so if things get bad enough that *small* businesses (sometimes private, or not a large part of the whole stock market), the big public companies benefit by being able to scoop them up or scavenge for parts.

consolidation generally is another example of something that is usually bad for the economy but good for corporate profits.

and, of course, government corruption is also good for corporate profits but bad for the economy.