What the Stock Market Actually Tells Us

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Even if you don't fully understand it, the stock market these days is enough to make you breathe heavily into a bag for a minute to calm down. Playing or following the markets is full of both jargon and economics, plus the assumption that only older people with lots of money have anything to do with it. But it's worth figuring out, if only so your heart rate doesn't spike every time you see an apocalyptic headline.

One huge distinction that will help you make sense of the markets is that stock performance is not "the economy." Whenever a source insists that high closing numbers are great for the nation and proof that Americans are doing well overall, you can know to more or less ignore what comes next. Economist Claudia Sahm sums up why perfectly in a recent interview with Vox: "Stock prices don't reflect what's happening in the economy today," she says. "They're looking forward."

In other words, the stock market is all about speculation. Sure, investors and analysts often make their best guesses about where stocks are going with a lot of data. Human emotion can also fuel big swings in individual stocks, in financial sectors, and in aggregate. That's one reason why it's imperative to breathe deep and carry on when the stock market gets really wacky. It is true that the stock market can reveal larger weaknesses in the economy or kick off bad times. But most of all, it's a long game — and it's not even about what's actually happened yet.