Market vs. Economy
Markets discount the future; macro data reports the past.
It is normal to see the market rise during scary headlines or fall during "good" data. Markets are pricing future cash flows and the discount rate. Economic data is backward-looking and often revised. Treat the market as a forward-looking pricing engine, not a live economy gauge.
The Simple Model
Why market and economy diverge
- Markets focus on the next 6–18 months, not today.
- Economic releases are backward-looking and revised.
- Indexes are concentrated in large, global companies.
- Valuation and rates can move faster than GDP.
A Common Misconception
Practice: Expectations vs. Reality
Key Takeaways
Markets discount the future; macro data reports the past.
Focus on expectations, rates, and profits — not headlines.
Divergence is normal; it is not a paradox once you understand discounting.
Market vs. Economy
Markets discount the future; macro data reports the past.
It is normal to see the market rise during scary headlines or fall during "good" data. Markets are pricing future cash flows and the discount rate. Economic data is backward-looking and often revised. Treat the market as a forward-looking pricing engine, not a live economy gauge.
Table of Contents
The Simple Model
Why market and economy diverge
- Markets focus on the next 6–18 months, not today.
- Economic releases are backward-looking and revised.
- Indexes are concentrated in large, global companies.
- Valuation and rates can move faster than GDP.
A Common Misconception
Practice: Expectations vs. Reality
Key Takeaways
Markets discount the future; macro data reports the past.
Focus on expectations, rates, and profits — not headlines.
Divergence is normal; it is not a paradox once you understand discounting.
Related Terms
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