FYI seemed confused with these two news pieces:

Why stock market doesn’t reflect the economy“, and “Stocks hit by recession fears” appear to be contradicting each other. One detaches the market from reality, while the other re-attaches both together.

But they aren’t contradicting.

Truth is, the stock market doesn’t really reflect the economy: it reflects the expectations on near-future economy, and that embeds emotions like fear, hope and even some level of Messianism.

It’s a massive, complex, chaotic system, where multiple players make decisions on reward-and-punishment basis. While projecting their hopes, fears and prejudices in an attempt to predict the near future, they are actually making irrational choices.

So it’s perfectly normal that “recession fears” might trigger downturns. Both news links are right on the spot.

Advertisements