GDP is better indicator

Stock market is where investors connect to buy and sell investments – most commonly the stocks, which are shares of ownership in a public company.

Economy means a region in terms of production and consumption of goods and services and the supply of money. Today, the gross domestic product (GDP), not the stock market, is a better indicator of a nation’s economic growth or decline.

As a student of economics, I will say that the stock market shouldn’t be the sole indicator of nation’s economic health for plenty of reasons.

The country’s economic growth and the stock market prices often don’t correlate.

It’s a common phenomenon that economy booms but the stock market does not, or the stock market booms and the economy does not. I think the rising stock prices are an indicator of monetary inflation, not economic growth. An ever-rising stock market is not an indicator of a prospering economy as it is the indicator of corporate earnings, increased demand for stocks and falling discount rates. In most cases, an economic recession is frequently preceded by a peaking stock market. Because of the persisting flaws of the stock market, GDP can be proved to be a better one but not the best indicator, as GDP tells about the total domestic consumption, investment expenditures, government expenditures and exports during a financial year. Other indicators such as happiness index, education and health should also be included to indicate a country’s economic growth.