The stock market is NOT the economy.
The stock market is NOT the economy. While they are closely linked, they are not the same.
Unfortunately, the mass media ties the stock market and the economy together as if they are the same, which creates a great deal of confusion.
The economy is a way of defining everything we make, buy, sell and consume. The stock market is part of the economy, but its focus is very narrow...confined to securities that represent a portion of US companies.
Sometimes the economy and stock market move in the same direction at the same time, but most often they do not.
The economy is measured “after-the-fact” (unemployment, exports, etc) while the stock market responds instantly to economic changes and/or investor sentiment. Essentially, stock investors bet on the future.
Frequently, stock market gains can led to an economic recovery. That’s why the Federal Reserve performed what is called “Quantitative Easing (QE)” by creating $4 trillion dollars of liquidity since the 2008 stock market crash.
The stated objective by the Fed was to drive up the stock market in order to make consumers “feel” more wealthy since most people equate a healthy stock market with a healthy economy.
In other words, it was a psychological ploy to fake people out and make them feel like everything was OK so they would spend more freely, thereby giving a boost to the economy. But...it didn’t work.
The “real” economy is still locked in the doldrums (a state or period of inactivity or stagnation). And frankly, it might stay this way for many more years.
With all the bad news related to global stock market declines, is the average American in trouble if the US stock market crashes? Yes, but only if all or most of their assets are invested in equities/securities.
Given the fact that most of Safeguard clients tell us they are not heavily invested in the stock market, then there should be a soft landing when the market does take a precipitous dive as it did in 2008.
So, take heart and do not fear a stock market crash. It has happened many times before and will happen again. After all, a “correction” in the stock market always seems to make things better in the end.
OPINION
The next time around, the Federal Reserve will not be able to assert that they can fix the overall economy by executing another round of “QE”. The gig is up. The Fed is out of bullets, so to speak, and everyone knows it.
Hopefully (as painful as it may be) the “real economy” will then have a chance to work it’s way toward some semblance of stability and order.
Free markets were intended to function without the intervention of an artificial fix by the Fed and investment bankers who have nothing more on their mind than to rob Peter (you) to pay Paul (themselves).
GOOD NEWS
My next email has very good news related to the single-family rental market and why you, as investors in 1st lien trust deed notes, should be very encouraged.
Best Regards,
Robert Hubbard
Managing Director
Safeguard Capital Partners
A Morningstar Holdings, LLC Company
www.SafeguardCapitalPartners.com
Office: 877-280-5771 x225
Email: robert@safeguardcapitalpartners.com
