A question about the stock market

A reader recently asked us why the stock market is still going up when the economy is being battered by the COVID pandemic.

Good question! Of course, by the time you read this, the market may be falling. It’s all a gamble.

While all kinds of “experts” try to figure out how to make money on the stock market, no one has come up with a reliable formula that can predict how long a boom will last before there’s a bust. That’s because the market does not directly reflect how the economy is doing. What it does reflect is how much confidence investors have in the market, which is a different thing altogether.

A lot of the time stock prices rise just because more money is being poured into the stock market, regardless of how well the economy itself is doing. In fact, if people with money for various reasons don’t invest it directly into businesses, they may move that money into the stock market, thus driving up stock prices.

That could be part of the reason stocks are rising right now, even as much economic activity is on hold because of the pandemic.

Capitalism is full of contradictions that can spell disaster for the working class. That’s why we’re fighting for a socialist future, where the means of production are owned collectively by the working people, and the economy is planned to satisfy human need, not billionaires’ greed.

— Deirdre Griswold