Saturday, February 25, 2012
Dow 13,000 is a big number, but it's just a number
The Dow hit 13,000 this week, the highest it has been since the start of the financial crisis. This event has definitely caused people to start talking, but is 13,000 just a number? Many people think so. After all, the Dow only follows 30 companies, with the most expensive stocks carrying the most weight. The Dow can also rise even when the economy is shrinking and the number of jobs falling. But then again, seeing the number 13,000 can play games with people's minds, and different groups of people will react differently. Market investors will see this mark as a time to get out. Even though the Dow is far from being an accurate measure of the economy, it still manages to create a stir.
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4 comments:
Although it is not a good measure of how well the economy is doing, DOW does influence the people's prediction of the economy. So if DOW reaching 13,000 can signal to the people that the economy is recovering, it can help boost consumer confidence and probably increase economic activity.
Any sign of economic improvement will do a some good, even if it doesn't reflect the entire economy. This is the case because anything that will boost consumer confidence will help the economy. More consumption equals an expanding economy.
I agree with Sam, and the article.
This, may just be a number, however, consumer confidence is deadly. Low consumer confidence leads to high savings rates and no spending (something we need.) People have money, we have very high savings rates, we just need something to give them that psychological "OK" to spend (or that it is safe to spend.) The stock market certainly has the ability to heavily influence consumer confidence both positively and negatively.
Could not agree more with Frank, I would take anything to have people gain confidence in the economy and start spending again. It will have a domino effect and we will see our economy bounce back to the strong state it was in prior to the recession.
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