President Trump often uses stock market gains as the main indicator for the strength of the overall economy. But most economists agree it’s not the best way to judge whether the economy is doing well or not.
Basically, it’s a guessing game. When news happens, traders are constantly trying to predict whether other traders are going to think the news is good or bad for the market.
“The stock market tends to have these very large swings. That's partly because it reflects mass psychology and not just economics,” Georgetown Professor Harry Holzer said.
Unlike most presidents, President Trump has seemingly taken full credit for the high stock market and used that as proof of a successful economy. But what he has found out the hard way is if you take credit, you either take the blame or pass it on.
Instead of using the stock market, economists like Holzer like to focus on better indicators of a strong economy: the unemployment rate is probably the most well-known but it’s not the only one or even the most important. The gross domestic product (GDP) and productivity are also important factors.
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