February 04, 2021
We frequently refer to the fact that the stock market does not represent the economy. The stock market is looking towards the future but the economy looks at where we are today. Forecasters try to extrapolate the current data to predict the future of the economy. What if the current data is limited?
Measurements used about the economy are based largely on manufacturing. Publicly traded companies, including most manufacturing companies, submit data as part of their reporting requirements. This data becomes one of the sources for economic information and is used to measure the current economy and make forecasts.
Several factors are influencing why the economic data is not representative of the economy.
With the source of economic data provided by publicly traded companies declining, it is difficult to make predictions that are based on the broad economy. We aren’t economists but we assume many in the profession are looking at ways to obtain information for better predictions that encompasses the broad economy – not just manufacturing.
In the meantime, the stock market moves in its own way looking into its crystal ball for the future.