http://www.npr.org/sections/money/2017/01/04/508261371/episo...
"It's no secret that we here at Planet Money think the Dow is a terrible economic indicator. We don't like that it only looks at thirty companies. We don't like the way it does its math. We think it does a bad job reflecting the overall economy. Honestly, we're not sure why everyone is still talking about it."
It's like telling a compulsive gambler their favourite “system” won't predict luck. They just don't want to hear that.
Can you explain this statement? It's almost synonymous with the stock market, and is one of the most common headline numbers that people mention in business and economy news reports.
When stock markets plunge people panic and that panic is what causes economic instability. That's what causes issues. Economics is purely a product of human minds acting in unison or opposition.
For this to happen, though, enough people must be thinking that the market is poised for a big fall, so they're on a hair trigger, ready to sell right at the start of the drop.
The stock market would not be the economy in say, a Marxist system.
So a stock market index is only correlated with the local economy if there are few multinationals.