Stock Market & Economy

I have heard some views, essentially saying that stock market is its own thing and has little or nothing to do with the “real” economy where people are involved : they labour, educate and skill themselves, create, produce, buy, sell, pay and receive.

First, stock market as it is today involves the participation of millions of people who put their money where their sentiments. That could amount to billions of national currency, if not trillions. In effect, it is democratisation of the fruits of economy. At another level, it allows instant expression of appreciation and people’s confidence in businesses, their performance and their decision making which affect their future. And, it is a place where huge amounts of money are transacted and turned over everyday, keeping capital on the move.

These ought to be reason enough to regard stock markets as real, as part of our everyday economy. Their reality is especially understood when we think of an economy without stock markets. Businesses would function in almost complete isolation, without an idea of how the public feels about them and without the benefit of being watched over and checked by such generally impartial feedback.

Then there is hundred times more that stock markets directly contribute to the economy, through “valuations.” It enables businesses and their assets to be valued by the goodwill and trust of stakeholders among the public; and it facilitates “unlocking” of the value of assets that would otherwise remain dormant and in the dark. Today, valuations contribute big in banking and finance industry, who keep businesses of all sizes adequately capitalised and financed.

Stock markets are a big part of real economy any which way you view it.

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