Watching Wall Street and playing the stock market should always be a long-term prospect, but it's hard not to feel whiplash looking at the day's activity, especially now. Record highs and dizzying drops seem to follow each other closely, even as the U.S. economy staggers between mass unemployment and coronavirus lockdowns. From certain corners, investing and stocks sound like pretty good bets.
A recent analysis from FiveThirtyEight might put that theory to rest. Writer Neil Paine examined the larger trends last week to drive home the point that the stock market is not the economy. It's always important to remember that investors are trying to predict the future, based on economic indicators and necessarily incomplete data. A number of those indicators aren't looking so great, so what's driving up the indices?
"People, particularly the rich, have cut back their spending, so they need to park their funds somewhere like the stock market (especially since interest rates are rock-bottom)," economics professor Tara Sinclair told Paine. "Inequality can mean that even with millions out of work, there might still be a glut of funds from the high-earning and/or high-wealth individuals."
We've technically been in a recession since February, and it's already looking a lot different from previous recessions we've lived through. If you do still want to get involved with the stock market, there are smart ways to do so, even in a bear market. Talk to a financial professional if you can, and always stay focused on the No. 1 investment basic: Don't panic.