Stock Index Doesn't Measure Economy

Investors and Politicians must not get hooked to

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Investors must be aware that stock prices do not necessarily truly reflect the underlying company's business performance. And likewise, politicians must not jump staking claim to credit their policies, which they unfailing do, for the rise in the stock index purportedly as a sign of a booming economy. It is as far from the truth as the day is from the night. Surprisingly, when the index tanks, politicians find dozens of reasons to blame on for; while the economy and their policies remain what they were. Surely, the stock market and economy have distinct life cycles with differing pull-and-push forces, and of course different leading and lagging factors. Like it happens, on a once-a-year budget day, the finance minister claims his “dream budget” for the rise in stock index on that day. Few days later, markets spiral down following the unearthing of a banking scam; and the politician goes hiding when budget, economy and the corporate sector are where they were.

Politicians and their followers in the ring have vested interest in feeding this grand poppycock. They have to parrot what sounds music to their political masters and truly believe in the principle “do-as-directed.” The rise and fall of the index has nothing to do with the economy or with anything that the politicians are doing. In fact, most often, what they do is exactly the opposite of what they should and ought to be doing. But then, it is a known fact that the nation's economic interests, private business groups' agenda, individual minister's personal ambitions and the ruling party's objectives all are seldom congruous.